Mary Amiti and Sebastian Heise

The increasing dominance of large firms in the United States has raised concerns about pricing power in the product market. The worry is that large firms, facing fewer competitors, could increase their markups over marginal costs without fear of losing market share. In a recently published paper, we show that although sales of domestic firms have become more concentrated in the manufacturing sector, this development has been accompanied by the entry and growth of foreign firms. Import competition has lowered U.S. producers’ share of the U.S. market and put smaller, less efficient domestic firms out of business.  Overall, market concentration in manufacturing was stable in recent decades, though import penetration has greatly altered the makeup of the U.S. manufacturing sector.