This presentation by Chiara Criscuolo, Head of the OECD Productivity and Business Dynamics Division, Directorate of Science, Technology and Innovation, OECD, was made during the discussion “Market Concentration” held at the 129th meeting of the OECD Competition Committee on 7 June 2018. More papers and presentations on the topic can be found out at oe.cd/2gw.

1. WHAT’S DRIVING
CHANGES IN
CONCENTRATION
ACROSS THE
OECD?
Chiara Criscuolo
Productivity and Business Dynamics Division
STI/OECD
Competition Committee Hearing – Paris June 7th 2018

3. NO CAUSAL LINKAGES…. BUT RICH SET OF
EVIDENCE

4. • Work in progress!
• A piece of the
puzzle
• Our focus on
productivity and
business dynamics
(rather than
competition)
WARNING!

5. • Trends across the OECD
• Is the Digital transformation driving this?
• Differences between Manufacturing and
services?
• And how much can be explained by Productivity
and/or Innovation?
• Do we see other trends that might suggest
changes in market structure?
– Business dynamism
– Trends in M&A
ROADMAP

6. TRENDS IN CONCENTRATION
Note: Countries included: Australia, Austria, Belgium, Switzerland, Denmark, Finland, Japan, Hungary,
Norway, Portugal and Sweden. The estimates reported in the graph are those of year dummies in a
cross-country regression of the share of GO, L and VA in the top decile of the distribution with
year=2001 being the reference year and with 2-digit sectoral dummies inlincluded.
Source: MultiProd database, December 2017.
Trends in within-country-sector changes in Share of GO, VA, L in
the top decile of sales distribution

7. TRENDS IN MARK-UP
Note: Unconditional averages of firm-level log mark-ups. The figure plots log-mark-ups and indexes the
2001 level to 0, hence the vertical axes represent log-differences from the starting year which, given the
magnitudes, approximates well for growth rates. Source: Calligaris, Criscuolo and Marcolin, 2018

8. …ACROSS THE WHOLE DISTRIBUTION
Cobb-Douglas Translog
- Deciles of the mark-up distribution in the year-industry (A38), then
averaged across sectors.
- Dynamics not due to a particular country.
Source: Calligaris, Criscuolo and Marcolin, 2018

9. …WITH SOME HETEROGENEITY ACROSS
COUNTRIES
Belgium Germany
Denmark Spain
Source: Calligaris, Criscuolo and Marcolin, 2018

10. WITH SOME HETEROGENEITY ACROSS
COUNTRIES
Finland
France United Kingdom
Sweden
Source: Calligaris, Criscuolo and Marcolin, 2018

11. DO WE SEE DIFFERENT
PATTERNS IN DIGITAL SECTORS?

12. WHICH SECTORS ARE DEFINED AS DIGITAL
INTENSIVE?
Sector denomination (36 sectors)
Quartile of
digital
intensity
Sector denomination (36 sectors)
Quartile of
digital intensity
Agriculture, forestry, fishing Low Wholesale and retail trade, repair Medium-high
Mining and quarrying Low Transportation and storage Low
Food products, beverages and tobacco Low Accommodation and food service activities Low
Textiles, wearing apparel, leather Medium-low Publishing, audiovisual and broadcasting Medium-high
Wood and paper products, and printing Medium-high Telecommunications High
Coke and refined petroleum products Medium-low IT and other information services High
Chemicals and chemical products Medium-low Finance and insurance High
Pharmaceutical products Medium-low Real estate Low
Rubber and plastics products Medium-low Legal and accounting activities, etc. High
Basic metals and fabricated metal products Medium-low Scientific research and development High
Computer, electronic and optical products Medium-high
Advertising and market research; other business
services
High
Electrical equipment Medium-high Administrative and support service activities High
Machinery and equipment n.e.c. Medium-high Public administration and defence Medium-high
Transport equipment High Education Medium-low
Furniture; other manufacturing; repairs of
computers
Medium-high Human health activities Medium-low
Electricity, gas, steam and air cond. Low Residential care and social work activities Medium-low
Water supply; sewerage, waste management Low Arts, entertainment and recreation Medium-high
Construction Low Other service activities High
Source: Calvino, Criscuolo, Marcolin and Squicciarini 2018

13. DIGITAL GAP IN MARK-UPS EARLY 2000S AND
2013-14
0
10
20
30
40
50
60
Digital Intensive vs Less Top Digital Intensive vs Less
% 2001-03 2013-14
Source: Calligaris, Criscuolo and Marcolin, 2018

14. …WHEN LOOKING SEPARATELY AT
MANUFACTURING VS SERVICES
-10
0
10
20
30
40
50
Services Digital Services Non-Digital Manufacturing Digital
% 2001-03 2013-14
Cobb Douglas, same controls as before. Percentage differences in firms’
mark-ups relative to firms in manufacturing non-digital sector
Source: Calligaris, Criscuolo and Marcolin, 2018

15. CAN THIS “DIGITAL GAP” IN
MARK-UP TRENDS BE EXPLAINED
BY PRODUCTIVITY AND
INNOVATION?

17. THE DIVERGENCE IN SALES
a. Revenues in ICT services b. Revenues in non-ICT services
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2001 2003 2005 2007 2009 2011 2013
Frontier firms
Laggards
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2001 2003 2005 2007 2009 2011 2013
Frontier firms
Laggards
Source: Andrews, Criscuolo and Gal, 2017

18. …AND IN MULTI-FACTOR PRODUCTIVITY
GROWTH
Source: Andrews, Criscuolo and Gal, 2017

19. MARK-UPS BY PRODUCTIVITY VS
PRODUCTIVITY BY MARK-UP
Note: Panel composition in firms changes over time. Deciles are calculated in each period and sector.
Source: Calligaris, Criscuolo and Marcolin, 2018
Firms From Lowest to highest mark-upsFirms From Lowest to highest
productivity

20. THE MARK-UP GAP ALONG DIFFERENT FACETS
OF THE DIGITAL TRANSFORMATION
Unconditional changes in log mark-ups following a 1-standard-deviation
increase in log(X).
-0.10
-0.05
0.00
0.05
0.10
Source: Calligaris, Criscuolo and Marcolin, 2018

21. CONTROLLING FOR PRODUCTIVITY AND PATENT
STOCKS OF FIRMS IN DIGITAL SECTORS ACCOUNTS
FOR SOME… …BUT NOT ALL THE MARK-UP GAP!
…controlling for age, TFP, physical capital intensity and patent stock.
Percentage changes in mark-ups following a 1-standard-deviation increase in
(log)X. All reported coefficient significant at the 1% confidence level (dotted
bars report 5% significance).
-0.10
-0.05
0.00
0.05
0.10
Source: Calligaris, Criscuolo and Marcolin, 2018

22. OTHER TRENDS
IN DIGITAL INTENSIVE VS NON
DIGITAL INTENSIVE SECTORS
ACROSS THE OECD…

23. BUSINESS DYNAMISM IS DECLINING…
Entry rates – Within sector trends across 12 countries%
Country coverage: BEL, BRA, CRI, ESP, FIN, HUN, ITA, NLD, NOR, PRT, SWE, TUR.
Sectoral coverage: manufacturing and non-financial market services, excluding Coke and
refined petroleum and Real Estate.
Source: OECD DynEmp3 database May 2018. Data for some countries are preliminary.

24. …MORE IN DIGITAL INTENSIVE SECTORS
Entry rates – digital intensive vs. other sectors%
Source: OECD DynEmp3 database. Data for some countries are preliminary.

25. STRONG M&A GROWTH IN DIGITAL SECTORS
25Particularly number of deals and minority stakes.
High
Digital
Intensity
Target
Source: OECD calculations based on Zephyr

26. DIGITAL FIRMS ARE NOT JUST BUYING DIGITAL
26
Similar growth of digital &
non-digital acquisitions
Source: OECD calculations based on Zephyr

27. NON-DIGITAL FIRMS INCREASINGLY BUYING
DIGITAL
27
Increasing role of CVCs, accelerators and VC?
Source: OECD calculations based on Zephyr

28. ADDITIONAL SLIDES

29. TRENDS IN CONCENTRATION (2)
Note: Countries included: Australia, Austria, Belgium, Switzerland, Denmark, Finland Japan, Hungary,
Norway Portugal and Sweden. The estimates reported in the graph are those of year dummies in a
cross-country regression of the share of GO, L and VA in the top decile of the distribution with
year=2001 being the reference year.
Source: MultiProd database, December 2017.
Share of GO, VA, L in the top decile of LP distribution

30. CONCENTRATION C4 FROM ORBIS+STAN