Around one-third of the total decline in the services sector can be attributed to the increase in market concentration.6 Third, productivity gains have suffered: if price mark-ups attributable to market power are eliminated, according to one calculation this could increase what is known as total factor productivity in the United States by up to 20%.7 The results of these studies should undoubtedly be taken with the proverbial grain of salt.
Estimating profit margins is always fraught with uncertainty. And it is not always possible to infer the actual intensity of competition in the market from observed market concentration. In addition, other factors, such as the globalisation-induced outsourcing of activities, could have contributed to higher price mark-ups.8 However, these findings do indicate the potential impacts of diminishing competitive intensity and rising market power.