Concentration, stagnation and inequality: An agent-based approach

This paper presents a macroeconomic agent based model with endogenous innovation-driven growth and knowledge accumulation which aims to analyze the underlying causes of recent increase in market concentration, by focusing on interplay technical change power, resulting consequences terms higher inequality lower growth. The source concentration lies fact that heterogeneous firms do not have equal access capital-embodied innovations, as we assume this depends “knowledge gap”, i.e., difference between degree capital good’s advancement firm’s accumulated technological knowledge. analysis shows that, absence consistent spillovers long goods remain considerably different from each other, progress generates systematic differences productivity across firms, leading reallocation shares towards more productive firms. Consequently, newly-emerging large seek translate enhanced power into mark-ups, shift income distribution wages profits eventually undermines aggregate demand Yet, simulation experiments reveal evolution over time well its effects crucially depend presence (or lack thereof) legal entry barriers, which, influencing process diffusion reinforce attenuate) firms’ ability consolidate their dominant position thus exploit power.