The Becker Friedman Institute for Economics (BFI), the Chicago Economics Society (CES), and the Washington DC Chicago Booth Alumni Club hosted a conversation with Chicago Booth’s Chang-Tai Hsieh, Phyllis and Irwin Winkelried Professor of Economics, who shared his latest research on the industrial revolution in services. Idrees Kahloon, US Policy Correspondent for The Economist, moderated the discussion.
Hsieh and his co-author find that there has been a significant rise in national industry concentration in three sectors of the economy: services, retail and wholesale. These sectors have increased their share of employment by expanding into local markets but have also become increasingly specialized. As a result, top US firms today have a larger share of the national market in their chosen industries but on the whole, they have a smaller share of each local market because they are doing fewer things. As a result, these firms have not grown as a share of the aggregate economy.
These findings are in contrast to fears expressed in policy discussions over corporate consolidation and the need to break up big firms. Hsieh argues that the concentration of national market share by top firms in the service and retail industry has actually provided competition to local firms; they find that growth of the top firms in local services has been responsible for 80% of wage and employment growth in the US over the last four decades.