Declining Competition and Investment in the U.S. / Germán Gutiérrez, Thomas Philippon.

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Gutiérrez, Germán

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w23583.Publication details: Cambridge, Mass. National Bureau of Economic Research 2017.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: The U.S. business sector has under-invested relative to Tobin's Q since the early 2000's. We argue that declining competition is partly responsible for this phenomenon. We use a combination of natural experiments and instrumental variables to establish a causal relationship between competition and investment. Within manufacturing, we show that industry leaders invest and innovate more in response to exogenous changes in Chinese competition. Beyond manufacturing we show that excess entry in the late 1990's, which is orthogonal to demand shocks in the 2000's, predicts higher industry investment given Q. Finally, we provide some evidence that the increase in concentration can be explained by increasing regulations.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w23583 (Browse shelf(Opens below))	Not For Loan

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July 2017.

The U.S. business sector has under-invested relative to Tobin's Q since the early 2000's. We argue that declining competition is partly responsible for this phenomenon. We use a combination of natural experiments and instrumental variables to establish a causal relationship between competition and investment. Within manufacturing, we show that industry leaders invest and innovate more in response to exogenous changes in Chinese competition. Beyond manufacturing we show that excess entry in the late 1990's, which is orthogonal to demand shocks in the 2000's, predicts higher industry investment given Q. Finally, we provide some evidence that the increase in concentration can be explained by increasing regulations.