Dominic Smith

Contact Information

Dominic A Smith
ds@dominic-smith.com
Work Email
smith.dominic@bls.gov
Research Economist
Bureau of Labor Statistics (BLS)

Current CV

Work in Progress

Increases in concentration are a salient feature of industry dynamics during the past 30 years. This trend is particularly notable in the U.S. retail sector, where large national firms have replaced small local firms. Existing work focuses on national trends. Yet, less is known about the dynamics of concentration in local markets, and the relationship between local and national trends. We address this issue by providing a novel decomposition of the national Herfindahl-Hirschman Index into a local and a cross-market component. We measure concentration using new data on product-level revenue for all U.S. retail stores. Despite concentration increasing in 83 percent of markets between 1997 and 2007, the cross-market component explains 98 percent of the rise in national concentration, reflecting the expansion of multi-market firms. We estimate an oligopoly model of retail competition and find that the increase in markups implied by rising local concentration had a modest effect on retail prices.
Key Equation: National HHI = 0.02xLocal HHI + 0.98xCross-Market HHI
  • National concentration measures do not respond to local changes
  • Instead, national HHI depends on cross-market HHI (people in different markets shopping at the same firms)
HHI
Retail concentration has increased at the national and local level.
National Concentration accelerates in 1997 - Local concentration does not
HHI
83 percent of local markets (commuting zones) have increased concentration 97-07
HHI
Increase in local concentration happens across products
HHI
Change in markups implied by change in local HHI in simple model of Cournot competition

Publications

The Scope of U.S. Factoryless Manufacturing - 2015
The “factoryless manufacturing” (FM) business model is employed by a rising share of U.S. firms. Factoryless manufacturers outsource the fabrication of products but maintain control of the production process, own the associated intellectual property, and bear the entrepreneurial risk. FM is an important component in the role of U.S. firms in global manufacturing value chains. We estimate the scope of U.S. factoryless manufacturing using three approaches. First, we use financial reports for S&P 500 companies to show that FM is prevalent and increasing in the United States and that FM, once only common in the production of apparel, electronics, toys, and pharmaceuticals, has spread to a broader array of products. Second, we use Economic Census microdata to estimate that manufacturing value-added would have been 5 to 20 percent greater for 2007 if all FGPs were reclassified to manufacturing. Third, using a list of FM semiconductor companies matched to Economic Census microdata, we estimate that value-added would be 20 to 30 percent greater for semiconductor manufacturing, an industry where FM is especially prevalent, if FGPs were included. These results suggest that outsourcing and offshoring of product fabrication by U.S. firms is coupled with significant domestic production management. Thus, identifying FGPs in economic data is important for the study of fragmentation and globalization.

Inactive Project

Concentration and Foreign Sourcing in the U.S. Retail Sector
Results in this paper have been moved into other projects.