Decline in Business Sector Dynamism
The Council of Economic Advisers Report
notes:
“In summary, there
is evidence of 1) increasing concentration across a number of industries, 2) increasing
rents, in the form of higher returns on invested capital, across a number of
firms, and 3) decreasing business and labor dynamism. However, the links among
these factors are not clear. On the one hand, it could be that a decrease in
firm entry is leading to higher levels of concentration, which leads to higher
rents. On the other hand, it could be that higher levels of concentration are
providing advantages to incumbents which are then used to raise entry barriers,
leading to lower entry. Or it might be that some other factor is driving these
trends. For example, innovation by a handful of firms in winner-take-all
markets could give them a dominant market position in a very profitable market
that could be difficult to challenge, discouraging entry.”
Related: Business in America (cover story from The Economist)