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Title: Low Interest Rates, Market Power, and Productivity Growth
This study provides a new theoretical result that a decline in the long‐term interest rate can trigger a stronger investment response by market leaders relative to market followers, thereby leading to more concentrated markets, higher profits, and lower aggregate productivity growth. This strategic effect of lower interest rates on market concentration implies that aggregate productivity growth declines as the interest rate approaches zero. The framework is relevant for antitrust policy in a low interest rate environment, and it provides a unified explanation for rising market concentration and falling productivity growth as interest rates in the economy have fallen to extremely low levels.  more » « less
Award ID(s):
1949504
PAR ID:
10320006
Author(s) / Creator(s):
; ;
Date Published:
Journal Name:
Econometrica
Volume:
90
Issue:
1
ISSN:
0012-9682
Format(s):
Medium: X
Sponsoring Org:
National Science Foundation
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