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NERA Economists Evaluate Claims of Excessive Concentration in the US Economy

The Situation

The notion that the US economy is plagued by rising and excessive industrial concentration has become widely accepted in policy circles and among lawmakers. In July 2021, the Biden Administration made “combat[ing] the excessive concentration of industry” the focal point of its Executive Order on Promoting Competition in the American Economy, linking increasing concentration to a host of ills, including higher prices, sluggish growth, and stagnating wages. The Administration also directed federal agencies to step up antitrust enforcement. In January 2022, the Department of Justice and Federal Trade Commission announced their intention to revamp their merger review process to focus on trends in concentration, citing the proposition “that many industries across the economy are becoming more concentrated and less competitive.”

NERA's Role

NERA was retained by the US Chamber of Commerce to prepare a study evaluating the empirical basis for concerns over industrial concentration in the US economy. NERA Associate Director Dr. Robert Kulick and Consultant Andrew Card used publicly available data from the US Census Bureau’s Economic Censuses from 2002 through 2017 to evaluate three empirical claims: (1) that industrial concentration in the United States is rising; (2) that industrial concentration is persistent; and (3) that increases in industrial concentration, where observed, are economically harmful.

The Result

NERA’s analyses demonstrate that the most recent Economic Census data do not support claims that the US has a “monopoly problem,” that industrial concentration has reached excessive and harmful levels, or that US antitrust policy has failed. Specifically:

  • There is no general trend toward increasing industrial concentration in the US economy from 2002 through 2017. In both the manufacturing sector and the broader economy, industrial concentration has been declining since 2007.
  • The data do not support the claim that high levels of industrial concentration have become a persistent structural feature of the economy. Rather, more highly concentrated industries tend to become less concentrated over time, while less concentrated industries tend to become more concentrated.
  • Evidence from several case studies shows that rising industrial concentration can be a direct response to increasing competition.
  • The data indicate that increases in industrial concentration are associated with procompetitive economic outcomes, including output growth, job creation, and higher employee compensation.

NERA’s economists conclude that trends in industrial concentration should not be put forward by policymakers or antitrust enforcers as a basis for changing US antitrust policy. To the contrary, pursuing deconcentration as an economic policy objective in and of itself is unwarranted and risks causing significant economic harm. 

For more information, click here to read LAW 360’s article.

Please click here to read Real Politics article for more information.