Grant Category

Market Structure

Are markets becoming less competitive and, if so, why, and what are the larger implications?

The premise of a market economy is that broad-based economic gains come from a well-functioning market. Yet there is evidence that growing economic inequality is undermining our society’s ability to act collectively in pursuit of the nation’s welfare. When stakeholders who comprise economic systems subvert institutions for their own gain, the economy loses. If markets are becoming less competitive, the resulting increase in monopoly power could be contributing to these problems.

New data-driven research provides more evidence that markets are increasingly concentrated and that, in many cases, this is indicative of a reduction in competition. Markups, the traditional measure of monopoly power, are growing. Investment and new business start-ups have been falling steadily even as corporate profits are rising. At the same time, labor income as a share of national income is falling. Does the economy suffer from a monopoly problem and, if so, why, and what are the larger implications?

We are interested in research from an aggregate perspective, which has been common in the macroeconomic and labor literatures, as well as sectoral analysis that has been the focus of industrial organization literatures.

  • The causes of increased concentration
  • Consequences of concentration for productivity, investment, and economic growth
  • Consequences of concentration for labor markets and power

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Buyer Power in the Beef Industry

Grant Year: 2021

Grant Amount: $75,278

Grant Type: academic

Agricultural supply chains in the United States include hundreds or thousands of farmers and large agribusinesses that process and distribute the produce. Following a series of mergers over the past five decades, the farmers that contribute to the production of meat and grain each have the option of selling to only four predominant buyers, with the buyers varying by product. Given the disparity between the sizes of individual farmers and the agribusinesses, it is natural to wonder whether transaction prices reflect the marginal value of farmers’ product, as they would in a competitive market, or whether agribusinesses are able to exercise oligopsony power to artificially depress prices. These concerns are particularly salient now, given indictments for price-fixing and anticompetitive practices in the meatpacking industry. Yet farm bankruptcies have increased each year for the past decade. This project will study oligopsony power in cattle markets by quantifying the market power of the packers, assessing the causes and consequences of the market power, and examining how it has changed over the past two decades. Outcomes of interest include the degree of local market concentration, plant-specific mark-ups and the mechanisms that support the mark-ups, and evaluation of specific mergers.

Welfare Effects of Common Ownership

Grant Year: 2021

Grant Amount: $45,000

Grant Type: academic

The common ownership hypothesis suggests that when large investors own shares in more than one firm within the same industry, those firms may have reduced incentives to compete. Firms can soften competition by producing fewer units, raising prices, reducing investment, innovating less, or limiting entry into new markets. The U.S. Department of Justice, the Federal Trade Commission, the European Commission, and the Organisation for Economic Co-operation and Development have all acknowledged concerns about the anticompetitive effects of common ownership and have relied on the theory and evidence of common ownership in major merger cases. This is a series of four separate projects by the four researchers. The first project seeks to show a link between executive compensation and measures of common ownership, providing a "mechanism" for how common ownership might affect competition and consumption. The second focuses on innovation, building on recent work and seeking to incorporate effects of common ownership, which are predicted to vary according to technological and product-market relationships. The third project is largely theoretical and will study the size and magnitude of the relationship between common ownership and innovation and the extent to which that varies across the universe of publicly listed U.S. corporations. Finally, the fourth project is a data collection effort, expanding the universe of high-quality common ownership data outside of the United States.

The role of culture and competition in media diversity: Historical evidence from U.S. radio stations

Grant Year: 2020

Grant Amount: $15,000

Grant Type: doctoral

This historical analysis focuses on whether racial discrimination by firms led to underprovision of content for minorities in the U.S. radio market in the post-war Jim Crow era and whether competition in the market reduced the racial divide. More specifically, the researcher looks at how the entry of television in local markets in the 1950s and 1960s affected programming for Black audiences. Using Federal Communications Commission annual financial reports, directories of radio stations, and the National Opinion Research Center’s 1944 and 1946 racial attitude surveys, the author will analyze how and if discrimination played a role in firms’ programming decisions.

Mark-ups in the cement industry: An evolution of scale economies and market power

Grant Year: 2020

Grant Amount: $51,750

Grant Type: academic

Prior research suggests that concentration and firm mark-ups have increased in the United States over the past several decades, potentially resulting in a higher share of income going to capital instead of labor. These previous multi-industry studies have not addressed why concentration and mark-ups may have increased, and how policies, such as greater antitrust enforcement or merger review, could alter these trends. This project aims to contribute to these unanswered questions by focusing on an industry-specific analysis. Utilizing cement industry data from the United States between 1973 and 2019, the authors will explore how technological change sparked by the introduction of the precalciner kiln altered market structure and the changes in the share of income going to owners’ profits relative to workers’ wages over time.

Do merger reviews promote competition and stall consolidation?

Grant Year: 2020

Grant Amount: $75,000

Grant Type: academic

This project will provide estimates of the impact of prospective merger reviews on antitrust enforcement actions, product prices, input prices, output, investment, and research and development. Using administrative data collected through taxation, employment, and antitrust provision, the project exploits the introduction of a premerger notification policy in Chile to see how it changed the types of mergers being agreed to. The result will help policymakers understand how much notification systems have a deterrent impact. Prospective merger reviews constitute a large share of antitrust enforcement expenditures, and yet little work has systematically studied its effectiveness. By providing a comprehensive study across industries using detailed data on real economic variables, this project could provide invaluable insights into the effects of mergers in both input and output markets, the impact of notification requirements, and the resource allocation within enforcement agencies.

Cannabis-infused dreams: A market at the crossroads of criminal and conventional

Grant Year: 2020

Grant Amount: $15,000

Grant Type: doctoral

Policy changes at the state and local levels have created recreational cannabis markets in many municipalities across the United States. It is well-known that the War on Drugs disproportionately incarcerated members of the Black and Latinx communities. This research project will explore how the legalization of recreational cannabis in Seattle, Boston, and San Francisco integrated criminal justice and racial economic equity initiatives. The researcher will conduct interviews and complete a comparative case study of policy debates and implementation. Using this mixed-methods approach, the researcher intends to illuminate how market power granted by states can shape equity.

Experts

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Siwei Cheng

New York University

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Jenn Round

Rutgers University

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Emi Nakamura

University of California, Berkeley

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Patrick Denice

Western University

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Joanna Venator

Boston College

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