Market power and innovation in the intangible economy
Speaker(s)Maarten de Ridder (London School of Economics, United Kingdom)
LocationTinbergen Institute Amsterdam, room 1.01
Date and time
October 28, 2021
16:00 - 17:15
Abstract: This paper offers a unified explanation for the slowdown of the productivity growth, the decline in business dynamism and the rise of market power. In a quantitative framework, I show that the rise of intangible inputs - such as software can explain these trends. Intangibles reduce the marginal costs and raise fixed costs, which gives firms with high-intangible adoption a competitive advantage, in turn deterring other firms from entering. I structurally estimate the model on French and US micro data. After initially boosting productivity, the rise of intangibles causes a significant decline in productivity growth, consistent with the empirical trends observed since the mid-1990s.