Microeconomics: Industry Concentration and Price Sensitivity

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What is a result of an increase in product market competition?

Labor shares will rise in all industries

Within-industry concentration rates of firm sales will rise (correct)

High productivity firms will capture a smaller share of the market

Consumers will become less sensitive to prices

What happens when consumers or corporate buyers become more sensitive to price?

Less output will be allocated to the more productive firms

Output will be reallocated to the firms with high labor shares

Relatively more output will be allocated to the less productive firms

Relatively more output will be allocated to the more productive firms (correct)

What is a characteristic of the 'superstar' firms?

They are more productive than other firms (correct)

They have a lower labor share than other firms

They have a smaller share of the market than other firms

They are less productive than other firms

What is expected to happen to labor shares in industries where concentration rises the most?

They will fall Signup and view all the answers

What is a prediction of the reallocation of market share between firms?

It will have a substantial reallocation component between firms Signup and view all the answers

What is expected to be found across countries?

Similar patterns of changes in concentration and labor's share Signup and view all the answers

What is the main idea of the Gilbert and Newbery (1982) model?

Incumbents are more likely to innovate than entrants. Signup and view all the answers

What is a potential worrying explanation of growing concentration?

Erecting barriers to entry. Signup and view all the answers

What is the significance of the study of dynamic industries in the context of concentration?

To assess the effect of innovation on competition. Signup and view all the answers

What is the difference between explanations of growing concentration based on innovation and those based on regulatory barriers?

Regulatory barriers explanations have welfare implications. Signup and view all the answers

What is the purpose of studying the growth of occupational licensing?

To assess the effect of regulation on entry. Signup and view all the answers

What could be an alternative explanation of growing concentration?

An increase in the sunk costs of entry. Signup and view all the answers

What do the first three columns of the table present?

Five-year long differences Signup and view all the answers

What is the relationship between changes in concentration and changes in the share of payroll in value-added according to the baseline specification?

Industries where concentration rose the most were also those where the labor share fell by the most. Signup and view all the answers

At what level are the correlations between changes in concentration and changes in the labor share statistically significant?

10% level Signup and view all the answers

What is included in the broader measure of labor compensation used in row 2?

Employer contributions to private health insurance and private pensions Signup and view all the answers

What is the purpose of using the KLEMS data in row 3?

To correct the value-added measure for use of intermediate services Signup and view all the answers

What is mentioned in Appendix B for details?

The correction of the value-added measure for use of intermediate services Signup and view all the answers

What is a characteristic of the coefficients on the within-firm component?

They are small, generally insignificant, and occasionally positive Signup and view all the answers

What is the primary driver of the tight correlations between changes in concentration and changes in labor shares?

Between-incumbent reallocation Signup and view all the answers

What alternative techniques were considered for decomposing changes in labor shares?

Both traditional shift-share analysis and modified shift-share approach Signup and view all the answers

What does the superstar firm hypothesis suggest about concentrating industries?

They experienced a differential reallocation of economic activity towards firms that had lower labor shares Signup and view all the answers

What can be inferred about the role of firm entry and exit in changes in concentration?

They play a minor role in all sectors Signup and view all the answers

What is the main difference between the traditional shift-share analysis and the modified shift-share approach?

The allocation of the covariance term Signup and view all the answers

What is a possible effect of an increase in Chinese imports on industry labor share?

An increase in industry labor share Signup and view all the answers

How do Elsby, Hobijn and Sahin (2013) define total import intensity?

As the percentage increase in value-added needed to satisfy U.S. final demand Signup and view all the answers

What is a key difference between the analysis in Elsby, Hobijn and Sahin (2013) and the current analysis?

The use of data from both manufacturing and non-manufacturing industries Signup and view all the answers

What is the correlation between changes in concentration and other candidate explanatory variables?

Weak and non-systematic Signup and view all the answers

What is an example of a candidate explanatory variable examined in the analysis?

Business dynamism Signup and view all the answers

What is the scope of industries analyzed in the current study?

Only manufacturing industries Signup and view all the answers