Surprise, surprise, increasing concentration of market power in tech and other industries seems to explain much of the productivity slowdown: Computer and elec

Surprise, surprise, increasing concentration of market power in tech and other industries seems to explain much of the productivity slowdown: Computer and electronic products incurred a massive slowdown, with a contribution to MFP growth of 0.45 ppt. from 1997 to 2005 dwindling to 0.10 ppt. from 2005 to 2018....The MFP slowdown in computer and electronic products represents 66 percent of the slowdown in durable manufacturing and 31 percent of the slowdown in the private nonfarm business sector. ... Mordecai Kurz [...] finds growing market power in the IT sector, which may be stifling the entry and growth of young firms. Kurz reports that “declining or slow growing firms with broadly distributed ownership have been replaced by IT based firms with highly concentrated ownership,” and that “IT innovations enable and accelerate the erection of barriers to entry and once erected, IT facilitates maintenance of restraints on competition.” Foster, Grim, Haltiwanger, and Wolf also reference the concentration within high-tech industries, noting that, in contrast to the late 1990s, when “the productivity surge in the high-tech sectors [had] a high contribution of increased within-industry covariance between market share and productivity . . . the productivity slowdown in the post-2000 period in high tech is due to both a decrease in within-firm productivity growth but also a decrease in this covariance.” Titan Alon, David Berger, Robert Dent, and Benjamin Pugsley offer further evidence to support this finding, noting that “over the last three decades, the U.S. business sector has experienced a collapse in the rate of new startups alongside an enormous reallocation of economic activity from entrants and young firms to older incumbents.” Alon et al. clarify that this finding is not just particular to high-tech industries but is “widespread across industries and geographic markets,” so that while this could be relevant in high-tech industries, it could also help explain the productivity slowdowns in other industries. And, more generally, Grullon et al. observe that “more than 75% of U.S. industries have experienced an increase in concentration levels over the last two decades.”