Abstract: An increasing body of empirical evidence has documented trends to risen concentration, profits, markups, and market power in many industries across the world since the 1980s. Several factors – such as globalisation, digitisation, the increased role of intangible assets and sunk costs, as well as M&A activity and the (under)enforcement of merger control– have been pointed to as likely determinants of the observed patterns. A major critique to some of these studies is that concentration is measured at the national industry level because economic markets are generally not observed directly in the data. Yet, both the product market dimension as well as the geographic market dimension might not --and generally do not-- coincide with this level of aggregation. We use a novel database that identify over 30,000 product/geographic antitrust markets affected by over 5,000 mergers scrutinized by the European Commission between 1990--2014. We show that concentration as measured by the market-specific HHI has increased over time, yet there is a great deal of heterogeneity across several dimensions. First, concentration seem to have increased more in broad world-wide markets than in more narrowly defined national markets. Moreover, concentration seems to have been increased more in the service sectors than in manufacturing. Even among these sectors, we observe quite some heterogeneity across industries. To exploit this within-industry variation and identify significant correlates to concentration, we use a regression framework. Preliminary results show that intangible intensity is positively and significantly correlated with concentration especially in services -- independently of the geographic market definition -- and in broad world-wide manufacturing markets. Moreover, we show that market-level barrier to entry are also highly and positively correlated with the HHI. The industry-specific past enforcement of merger control as well as the extent of the industry-specific merger wave seem to have a less consistent pattern of correlation.
Joint with Pauline Affeldt, Klaus Gugler, and Joanna Piechucka