Rising markups,common ownership,and technological capacities |
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| Institution: | 1. Dipartimento di Economia e Finanza, Catholic University of Milan, Via Necchi 5, 20123 Milano, Italy;2. Dipartimento di Matematica per le Scienze Economiche, Finanziarie ed Attuariali, Catholic University of Milan, Largo Gemelli 1, Milano 20123, Italy;1. Institut Polytechnique de Paris, Telecom Paris, Department of Economics and Social Sciences, 19 Place Marguerite Perey, 91120 Palaiseau, France & University of Cape Town, School of Economics, Rondebosch, 7701, Cape Town, South Africa;2. Deloitte Finance, 6 Place de La Pyramide Tour Majunga Deloitte, 92800, Puteaux, France;1. Uber Technologies, Inc., USA;2. Department of Economics, Eller College of Management, University of Arizona, Tucson, AZ, USA;1. Georgetown University, Department of Economics, 37th and O Streets NW, Washington DC 20057, USA;2. Georgetown University, McDonough School of Business, 37th and O Streets NW, Washington DC 20057, USA;3. Federal Reserve Board, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington DC 20551, USA;4. The Ohio State University, 410 Arps Hall, 1945 N High Street, Columbus OH 43210, USA |
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| Abstract: | This paper analyses the impact of common ownership on markups and innovation and adds to the discussion of the recently observed patterns of a long term rise in market power. Using a panel of European manufacturing firms from 2005 to 2016, we structurally infer markups and construct a measure of common ownership. We use a propensity score reweighting estimator to eliminate biases due to observational characteristics and find an increase of firm markups ranging up to 3.3% on average in industries with high technological spillovers after the first exposure to common ownership. For companies directly held by common institutional investors, we also measure a positive effect on citation-weighted patents of up to 9.6% in high-spillover industries on average. Both findings are consistent with recent theoretical findings in López and Vives (2019). |
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