by SPENCER Y. KWON, YUERAN MA, & KASPAR ZIMMERMANN
Abstract
We collect data on the size distribution of all U.S. corporations for 100 years. We document thatcorporate concentration (e.g., asset share or sales share of top businesses) has increased persistentlyover the past century. Rising concentration was stronger in manufacturing and mining beforethe 1970s, and stronger in services, retail, and wholesale after the 1970s. Furthermore, risingconcentration in an industry aligns with greater technological intensity and more fixed costs.Industries with higher increases in concentration also exhibit higher output growth. Among theleading hypotheses for rising concentration, stronger economies of scale appear consistent withthe long-run trends.
1 Introduction
The role of large businesses in the economy is an important question for researchers, policymakers,and the public. The finding of rising concentration among U.S. industries since the 1980s (as shownbyAutor et al.(2020) and others using comprehensive census data covering this period) has attractedparticular attention. Recent discussions of this evidence often focus on the special features of today’sworld. In the archives of history, however, lives an old conjecture that rising concentration is a feature,if not a law, of industrial development. In fact, bothMarx(1867) and Marshall(1890) wrote thattechnological progress increases economies of scale and raises the concentration of production.Lenin(1916) gathered census statistics in the early 1900s to back up the conviction that “the enormous growthof industry and the remarkably rapid concentration of production…are one of the most characteristicfeatures of capitalism.” After the National Bureau of Economic Research (NBER) was established in1920 to provide “exact and impartial determinations of facts,” one of its first publications also noted thespread of mass production at that time, as well as a general view that “each generation believes itself tobe on the verge of a new economic era” but what appears to be new often represents recurring themesin history (Committee on Recent Economic Changes,1929).
In this paper, we collect data covering the population of U.S. corporations for 100 years, from 1918to 2018. We use these data to study the long-run evolution of the concentration of production, namely the extent to which a small set of top businesses account for a large share of production assets or output.We document that corporate concentration in the U.S. (measured using the asset share, sales share, ornet income share of top businesses) has increased over the past century. Among different sectors, rising concentration was stronger in manufacturing and mining before the 1970s, and stronger in services,retail, and wholesale after the 1970s. We then examine the leading hypotheses about the economicmechanisms behind rising concentration, including economies of scale, globalization, regulation, amongothers. Overall, our data show that increasing concentration of production activities has been a featureof the U.S. economy for at least a century, and long-run forces can be important for this development.
We obtain long-run data on the business size distribution in the U.S. by digitizing historical publi-cations of the Statistics of Income (SOI) and the associated Corporation Source Book from the InternalRevenue Service (IRS). Since 1918, the SOI has been reporting annual statistics of the population ofcorporations by size bins, including the number of businesses and their financial information (e.g.,assets, sales, net income). We use these size bins to estimate top businesses’ shares in the aggregate,the main sectors (roughly one-digit SICs), and the subsectors (roughly two-digit SICs). Our baseline estimation method uses the generalized Pareto approach by fitting a Pareto curve to each size bin(Blanchet, Fournier, and Piketty,2022); results are over 0.99 correlated if we instead fit a lognormalcurve to each size bin, or directly add the top bins up to a given number of businesses. The SOI datacapture production activities in the U.S. (similar to the gross output convention in the national accounts),which align with our focus on the concentration of production.
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