The Industrial Revolution in Services

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. Top firms in these sectors have grown entirely by expanding into new local markets that are predominantly small and mid-sized U.S. cities. Local concentration has decreased in all U.S. cities but by significantly more in cities that were initially small. Top U.S. firms in the aggregate economy are increasingly specialized in sectors with rising industry concentration, but their aggregate employment share has remained roughly stable. These facts are consistent with the availability of a new set of fixed-cost technologies in non-traded sectors that enable adopters to produce at lower marginal costs in all markets.