European Firm Concentration and Aggregate Productivity

Abstract This paper derives a European Herfindahl–Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity toward large and concentrated industries. Over the same period, productivity gains fro...

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Bibliographic Details
Published inJournal of the European Economic Association Vol. 21; no. 2; pp. 455 - 483
Main Authors Bighelli, Tommaso, di Mauro, Filippo, Melitz, Marc J, Mertens, Matthias
Format Journal Article
LanguageEnglish
Published Oxford University Press 05.04.2023
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Summary:Abstract This paper derives a European Herfindahl–Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity toward large and concentrated industries. Over the same period, productivity gains from an increasing allocative efficiency of the European market accounted for 50% of European productivity growth while markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.
ISSN:1542-4766
1542-4774
DOI:10.1093/jeea/jvac040