NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Market Structure and Productivity: A Concrete Example

Chad Syverson

NBER Working Paper No. 10501
Issued in May 2004
NBER Program(s):   IO   PR

Many studies have documented large and persistent productivity differences across producers, even within narrowly defined industries. This paper both extends and departs from the past literature, which focused on technological explanations for these differences, by proposing that demand-side features also play a role in creating the observed productivity variation. The specific mechanism investigated here is the effect of spatial substitutability in the product market. When producers are densely clustered in a market, it is easier for consumers to switch between suppliers (making the market in a certain sense more competitive). Relatively inefficient producers find it more difficult to operate profitably as a result. Substitutability increases truncate the productivity distribution from below, resulting in higher minimum and average productivity levels as well as less productivity dispersion. The paper presents a model that makes this process explicit and empirically tests it using data from U.S. ready-mixed concrete plants, taking advantage of geographic variation in substitutability created by the industry's high transport costs. The results support the model's predictions and appear robust. Markets with high demand density for ready-mixed concrete and thus high concrete plant densities have higher lower-bound and average productivity levels and exhibit less productivity dispersion among their producers.

download in pdf format
   (938 K)

email paper

This paper is available as PDF (938 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10501

Published: Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December. citation courtesy of

Users who downloaded this paper also downloaded these:
Foster, Haltiwanger, and Syverson w11555 Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?
Syverson w15712 What Determines Productivity?
Hortacsu and Syverson w12894 Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices
Syverson w10049 Product Substitutability and Productivity Dispersion
Dunne, Klimek, Roberts, and Xu w15313 Entry, Exit, and the Determinants of Market Structure
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us