Chad Syverson

Market Structure and Productivity: A Concrete Example

Many studies have documented large and persistent productivity differences across producers, even within narrowly defined industries. This paper both extends and departs from the past literature, which focused on technological explanations for these differences, by proposing that demand‐side features also play a role in creating the observed productivity variation. The specific mechanism investigated here is the effect of spatial substitutability in the product market. When producers are densely clustered in a market, it is easier for consumers to switch between suppliers (making the market in a certain sense more competitive). Relatively inefficient producers find it more difficult to operate profitably as a result. Increases in substitutability truncate the productivity distribution from below, resulting in higher minimum and average productivity levels as well as less productivity dispersion. The paper presents a model that makes this process explicit and empirically tests it using data from U.S. ready‐mixed concrete plants, taking advantage of geographic variation in substitutability created by the industry’s high transport costs. The results support the model’s predictions and appear robust. Markets with high demand density for ready‐mixed concrete—and thus high concrete plant densities—have higher lower‐bound and average productivity levels and exhibit less productivity dispersion among their producers.

Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry: A Case Study of S&P 500 Index Funds

We investigate the role that nonportfolio fund differentiation and information/search frictions play in creating two salient features of the mutual fund industry: the large number of funds and the sizable dispersion in fund fees. In a case study, we find that despite the financial homogeneity of S&P 500 index funds, this sector exhibits the fund proliferation and fee dispersion observed in the broader industry. We show how extra-portfolio mechanisms explain these features. These mechanisms also suggest an explanation for the puzzling late-1990s shift in sector assets to more expensive (and often newly entered) funds: an influx of high-information-cost novice investors.

E-Commerce and the Market Structure of Retail Industries

This article examines the effect of the advent and diffusion of e-commerce on supply-side industry structure. We specify a general industry model involving consumers with differing search costs buying products from heterogeneous producers. We interpret e-commerce as a reduction in consumers’ search costs. We show how it reallocates market shares from high-cost to low-cost producers. We test the model using US data for three industries: travel agencies, bookstores and new car dealers. Each industry exhibits the market share shifts predicted by the model but the mechanisms vary, ranging from aggregate factors in the travel industry to local-market factors in the other two industries.

PRICES, SPATIAL COMPETITION AND HETEROGENEOUS PRODUCERS: AN EMPIRICAL TEST*

Homogeneous-producer models attribute lower prices in denser markets solely to lower optimal markups. I argue here that when producers have different production costs, competition-driven selection on costs also reduces prices. This selection mechanism can be distinguished from the homogenous-producer case because it implies that higher density leads not only to lower average prices, but to declines in upper-bound prices and price dispersion as well. I find empirical support for this mechanism in the prices of ready-mixed concrete plants. I also show these findings do not simply reflect lower factor prices in dense markets, but result instead because dense-market producers are more efficient.

Network structure of production

Complex social networks have received increasing attention from researchers. Recent work has focused on mechanisms that produce scale-free networks. We theoretically and empirically characterize the buyer–supplier network of the US economy and find that purely scale-free models have trouble matching key attributes of the network. We construct an alternative model that incorporates realistic features of firms’ buyer–supplier relationships and estimate the model’s parameters using microdata on firms’ self-reported customers. This alternative framework is better able to match the attributes of the actual economic network and aids in further understanding several important economic phenomena.

The Slow Growth of New Plants: Learning about Demand?

It is well known that new businesses are typically much smaller than their established industry competitors, and that this size gap closes slowly. We show that even in commodity-like product markets, these patterns do not reflect productivity gaps, but rather differences in demand-side fundamentals. We document and explore patterns in plants’ idiosyncratic demand levels by estimating a dynamic model of plant expansion in the presence of a demand accumulation process (e.g., building a customer base). We find active accumulation driven by plants’ past production decisions quantitatively dominates passive demand accumulation, and that within-firm spillovers affect demand levels but not growth.

Sales Force and Competition in Financial Product Markets: The Case of Mexico's Social Security Privatization

This paper examines how sales force impacts competition and equilibrium prices in the context of a privatized pension market. We use detailed administrative data on fund manager choices and worker characteristics at the inception of Mexicos privatized social security system, where fund managers had to set prices (management fees) at the national level, but could select sales force levels by local geographic areas. We develop and estimate a model of fund manager choice where sales force can increase or decrease customer price sensitivity. We find exposure to sales force lowered price sensitivity, leading to inelastic demand and high equilibrium fees. We simulate oft proposed policy solutions: a supply‐side policy with a competitive government player and a demand‐side policy that increases price elasticity. We find that demand‐side policies are necessary to foster competition in social safety net markets with large segments of inelastic consumers.