Market concentration and productivity: evidence from the UK

We measure product market concentration and business dynamism in the UK from 1997 to 2020 and study the relationship with productivity. Our results show that concentration in the UK is increasing among narrow industries on average, but for a broad market definition, concentration and business dynamism are stable. We find a negative relationship between concentration and productivity for the average firm, but a positive relationship for the average worker. This occurs because higher industry concentration is associated with better allocative efficiency, measured by the proportion of workers in higher-productivity firms.