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US Industries Becoming More Concentrated

Figure 2 Correcting ROIC for intangible capital

Source: Ayyagari et al. (2018).

Figure 2 shows that, once we adjust for intangible capital, there is no evidence of an increasing gap between superstar firms and others. Furthermore, the rise in inequality in Figure 1 occurred mostly in industries that rely on complex problem-solving, non-routine cognitive analytical skills, and low routine manual skills. Once we adjust for intangible capital, we no longer see a run-up in ROIC, even in these industries. It is likely that the run-up seen by previous researchers was due to mis-measurement of capital.