Market Power and Innovation in the Intangible Economy
De Ridder, M.
Cambridge Working Papers in Economics
Cambridge-INET Working Paper Series
Faculty of Economics, University of Cambridge
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De Ridder, M. (2019). Market Power and Innovation in the Intangible Economy. https://doi.org/10.17863/CAM.79759
This paper offers a unified explanation for the slowdown of productivity growth, the decline in business dynamism and the rise of market power. Using a quantitative framework, I show that the rise of intangible inputs – such as software – can explain these trends. Intangibles reduce 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 U.S. 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.
Productivity, Growth, Business Dynamism, Intangible Inputs, Market Power
This record's DOI: https://doi.org/10.17863/CAM.79759
This record's URL: https://www.repository.cam.ac.uk/handle/1810/332313
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Licence URL: https://www.rioxx.net/licenses/all-rights-reserved/
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