Rising Markups and Declining Business Dynamism: Evidence From the Industry Cross Section

In recent decades, various measures of “business dynamism”—such as new business entry rates and gross job or worker flows—have seen significant declines in the U.S.. Over a similar time frame, there is evidence that an important measure of market power—the average markup—has risen significantly (figure 1, left panel; De Loecker, Eeckhout, and Unger 2020). A natural question is whether these patterns are related.