Chart of the Week: The Rise of Corporate Giants
IMF Blog, June 6, 2018
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- Chart of the Week: The Rise of Corporate Giants
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Bibliographic details
- Authors: Federico J Dez, Daniel Leigh
- Published: June 6, 2018
Overview
- Authors: Federico J. Díez, Daniel Leigh
- Publication date: June 6, 2018
- Scope: Analysis based on an upcoming IMF working paper using data for publicly listed companies from 74 countries.
- Measure used: Average markups on goods and services across all companies (markup defined as the ratio of the price charged to the marginal cost of producing an additional unit).
Key findings
- Markups in advanced economies:
- Increased since the 1980s by 43 percent on average.
- The upward trend has accelerated during the present decade.
- Markups in emerging market and developing economies:
- Rose by 5 percent on average since 1990.
- Distributional pattern across firms:
- Increase in markups in advanced economies is mostly driven by “superstar” firms that further increased their market power.
- Markups in other firms have essentially been flat.
- Sectoral breadth:
- The pattern of rising markups among superstar firms is found in all broad economic sectors, not just information and communication technology.
Implications for investment, innovation, and labor
- Investment and innovation:
- Starting from low levels, higher markups are initially associated with increasing investment and innovation.
- This relationship becomes negative when market power becomes too strong.
- The negative link between markups and investment and innovation is stronger in industries featuring higher degrees of market concentration.
- Labor share:
- The paper finds a negative association in firms between labor shares and markups.
- Implication: the labor share of income declines in industries where market power rises; the share of revenue going to profits increases.
Policy considerations and open questions
- Drivers under debate (possible culprits listed in the source):
- The rise of intangible assets such as software.
- Network effects (when a product’s value to the user increases as the number of users of the product grows).
- Weaker anti-trust enforcement.
- Policy implications depend on which factors are responsible for the increase in global market power.
- Recommendation: More research is needed to discriminate between the potential drivers.
- Convening: An upcoming conference, organized by the IMF, the World Bank, and the Organisation for Economic Co-operation and Development, will delve into corporate market power, competition policies, product market (de)regulation, and their macroeconomic effects.
Related media
- Video mentioned: “Digitalization and the New Gilded Age” (presented during a seminar at the 2018 IMF-World Bank Spring Meetings).
Source: Chart of the Week: The Rise of Corporate Giants, IMF blog, June 6, 2018.
Content in this bundle
- 本周图表：企业巨头的崛起，作者：Federico J. Díezt 和Daniel Leigh，2018年6月6日
- 今週のグラフ：巨大企業の台頭; フェデリコ・J・ディエス、ダニエル・リー, IMF ブログ 2018年6月6日掲載
- Диаграмма недели: возвышение корпоративных гигантов
