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Market Power Rose, Why Didn't Profits?
Over the past six decades, the power of American firms to charge prices above their production costs — which economists call "market power" — has grown. In 1960, prices averaged about 10 percent above the cost of producing an additional unit of output. By 2020, that gap had widened to 25 percent. One might expect those widening margins to show up as a lasting rise in the share of gross domestic product (GDP) flowing to profits. They did not, as profits have averaged about 16 percent of GDP since 1960 and have fluctuated widely but without a lasting upward trend.The gap between the price ...