Have U.S. companies gotten too big and too powerful? Does growing concentration -- more market share in fewer corporate hands -- explain why wage growth has stagnated, income inequality has gotten worse and investment and innovation have fallen behind? These are some of the hottest questions in economic circles these days, and the U.S. Federal Reserve is looking for answers. As central bankers start to meet in Jackson Hole, Wyoming, for the Federal Reserve Bank of Kansas City’s annual symposium, it will be the main topic.
Yes, researchers have shown that more than three-quarters of U.S. industries over the last two decades have seen an increase in concentration. These economists have also found that companies operating in more consolidated sectors earn higher profit margins. Markups -- how much a company charges for a product above its own costs -- have soared, another sign of rising market power. These findings are consistent with yet more research showing that a smaller number of firms across the U.S. economy are capturing a greater share of sales, giving rise to so-called superstar companies.