
The Industrial Revolution in Services [pdf] - barry-cotter
https://faculty.chicagobooth.edu/chang-tai.hsieh/research/services.pdf
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barry-cotter
So it seems that IT has actually had an effect on productivity, contrary to
previous research. It was just hard to see because it raised industry
concentration by enabling more efficient firms to serve a larger share of the
market. Given that this process is very far from over we should expect this to
happen in even more industries. If a market segment has crap or no software a
firm with functional or great software can do things their competitors just
can’t, or do the same things, cheaper, which either shows up on greater
profits or lower prices. See Flexport for how this applies to the massive
logistics industry. I’m sure there are many other examples.

> The rise in national industry concentration in the US between 1977 and 2013
> is driven by a new industrial revolution in three broad non-traded sectors:
> services, retail, and wholesale. Sectors where national concentra- tion is
> rising have increased their share of employment, and the expansion is
> entirely driven by the number of local markets served by firms. Firm
> employment per market has either increased slightly at the MSA level, or
> decreased substantially at the county or establishment levels. In industries
> with increasing concentration, the expansion into more markets is more
> pronounced for the top 10% firms, but is present for the bottom 90% as well.
> These trends have not been accompanied by economy-wide concentration. Top
> U.S. firms are increasingly specialized in sectors with rising industry
> concentration, but their aggregate employment share has remained roughly
> stable. We argue that these facts are consistent with the availability of a
> new set of fixed-cost technologies that enable adopters to produce at lower
> marginal costs in all markets. We present a simple model of firm size and
> market entry to describe the menu of new technologies and trace its
> implications.

