Cost-Price Relationships in a Concentrated Economy Cost-Price Relationships in a Concentrated Economy

By Falk Bräuning, José L. Fillat, and Gustavo Joaquim

The US economy is at least 50 percent more concentrated today than it was in 2005. In this paper, the authors estimate the effect of this increase on the pass-through of cost shocks into prices. Their estimates imply that the pass-through becomes about 25 percentage points greater when there is an increase in concentration similar to the one observed since the beginning of this century. The resulting above-trend price growth lasts for about four quarters. The authors’ findings suggest that the increase in industry concentration over the past two decades could be amplifying the inflationary pressure from current supply-chain disruptions and a tight labor market.

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