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Product Market Concentration and Productivity: Evidence from the UK

Product market concentration in the UK is increasing. Higher concentration industries have higher average-worker productivity, but lower average-firm productivity.
Product market concentration
Firm productivity
business dynamism
Business Structure Database (BSD)

Savagar,A., Aguda, O., Galanakis, Y., Wu, J., (2024), “Product Market Concentration and Productivity: Evidence from the UK”, Fiscal Studies, doi: 10.1111/1475-5890.12381

Authors
Affiliations

Anthony Savagar

University of Kent

Oluwaseun Aguda

OPS, Ontario

Yannis Galanakis

King’s College London

Jingwei Wu

University of Kent

Published

June 2024

Doi

10.1111/1475-5890.12381

Abstract

We measure product market concentration and business dynamism in the UK from 1997 to 2020 and study the relationship with productivity. Our results show that concentration in the UK is increasing among narrow industries on average, but for a broad market definition, concentration and business dynamism are stable. We find a negative relationship between concentration and productivity for the average firm, but a positive relationship for the average worker. This occurs because higher industry concentration is associated with better allocative efficiency, measured by the proportion of workers in higher productivity firms.

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