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Full-Text Articles in Law
Information Technology And Industry Concentration, James Bessen
Information Technology And Industry Concentration, James Bessen
Faculty Scholarship
Industry concentration has been rising in the US since 1980. Firm operating margins have also been rising. Are these signs of declining competition that call for a new antitrust policy? This paper explores the role of proprietary information technology systems (IT), which could increase industry concentration and margins by raising the productivity of top firms relative to others. Using instrumental variable estimates, this paper finds that IT system use is strongly associated with the level and growth of industry concentration and firm operating margins. The paper also finds that IT system use is associated with relatively larger establishment size and …
Information Technology And Firm Employment, James Bessen
Information Technology And Firm Employment, James Bessen
Faculty Scholarship
Do firms displace labor with new information technologies such as “artificial intelligence”? It is challenging to distinguish the effects of technology adoption from unobserved productivity and demand shocks. We take a first look at the economic impacts of large custom software investment —“IT spikes”—using a novel methodology to obtain consistent estimates. Following these events, firm employment increases by about 7% and revenues by about 11%. Rather than displace labor, IT spikes increase revenues and markups, implying decreased labor share of output. Moreover, growth is greater for firms that use AI, IT-producing firms, newer firms, and those in the trade, service, …
Declining Industrial Disruption, James Bessen
Declining Industrial Disruption, James Bessen
Faculty Scholarship
Recent research finds that markups are rising, suggesting declining competition. But does less price competition mean less Schumpeterian “creative destruction”/industry dynamism? This paper reports the first recent estimates of trends in the displacement of industry-leading firms. Displacement hazards rose for several decades since 1970 but have declined sharply since 2000. Using a production function-based model to explore the role of investments, acquisitions, and lobbying, we find that investments by dominant firms in intangibles, especially software, are distinctly associated with greater persistence and reduced leapfrogging. Software investments by top firms soared around 2000, contributing substantially to the decline. Also, higher markups …