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The Evolution of U.S. Retail Concentration

Author

Listed:
  • Dominic A. Smith
  • Sergio Ocampo
Abstract
Increases in national concentration have been a salient feature of industry dynamics in the U.S. and have contributed to concerns about increasing market power. Yet, local trends may be more informative about market power, particularly in the retail sector where consumers have traditionally shopped at nearby stores. We find that local concentration has increased almost in parallel with national concentration using novel Census data on product-level revenue for all U.S. retail stores. The increases in concentration are broad based, affecting most markets, products, and retail industries. We implement a new decomposition of the national Herfindahl Hirschman Index and show that despite similar trends, national and local concentration reflect different changes in the retail sector. The increase in national concentration comes from consumers in different markets increasingly buying from the same firms and does not reflect changes in local market power. We estimate a model of retail competition which links local concentration to markups. The model implies that the increase in local concentration explains one-third of the observed increase in markups.

Suggested Citation

  • Dominic A. Smith & Sergio Ocampo, 2022. "The Evolution of U.S. Retail Concentration," Working Papers 22-07, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:22-07
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    File URL: https://www2.census.gov/ces/wp/2022/CES-WP-22-07.pdf
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    References listed on IDEAS

    as
    1. Robert E. Hall, 2018. "New Evidence on the Markup of Prices over Marginal Costs and the Role of Mega-Firms in the US Economy," NBER Working Papers 24574, National Bureau of Economic Research, Inc.
    2. Peter Arcidiacono & Patrick Bayer & Jason R. Blevins & Paul B. Ellickson, 2016. "Estimation of Dynamic Discrete Choice Models in Continuous Time with an Application to Retail Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 889-931.
    3. Emek Basker, 2005. "Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 174-183, February.
    4. Haltiwanger, John & Jarmin, Ron & Krizan, C.J., 2010. "Mom-and-Pop meet Big-Box: Complements or substitutes?," Journal of Urban Economics, Elsevier, vol. 67(1), pages 116-134, January.
    5. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
    6. Ben Lipsius, 2018. "Labor Market Concentration does not Explain the Falling Labor Share," 2018 Papers pli1202, Job Market Papers.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. David Autor & Christina Patterson & John Van Reenen, 2023. "Local and national concentration trends in jobs and sales: the role of structural transformation," CEP Discussion Papers dp1916, Centre for Economic Performance, LSE.
    2. Oz Shy, 2021. "College Education, Earning Inequality, and Market Power," Journal of Labor Research, Springer, vol. 42(3), pages 334-357, December.
    3. Giroldo, Renato & Hollenbeck, Brett, 2021. "Concentration, Retail Markups, and Countervailing Power: Evidence from Retail Lotteries," MPRA Paper 109039, University Library of Munich, Germany.

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    More about this item

    Keywords

    Retail; Local Markets; Concentration; Herfindahl-Hirschman Index;
    All these keywords.

    JEL classification:

    • L8 - Industrial Organization - - Industry Studies: Services

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