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

Industry concentration increased about 50 percent in the United States from 2005 to 2020, and this trend is projected to have accelerated since the onset of the COVID-19 pandemic. The surge in inflation in 2020 and 2021 has prompted recent debate about the role that concentration plays in the pass-through of firms’ costs into consumer prices. This paper uses local projections with granular instrumental variables to estimate the aggregate pass-through of costs into prices and how it is affected by industry concentration.

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