The Census Bureau conducts the
Economic Census once every five years. The Economic Census is a
survey of nearly four million businesses that is used to calculate
all sorts of important statistics such as the GDP and PPI (Producer
Price Index). The Economic Census catagorizes all firms according
to a scheme known as the
North American Industry Classification System (NAICS)
. The NAICS is a hierarchical scheme that assigns each firm a
code designating the firm's sector, subsector, industry group, and
industry. Each firm can only be assigned a single code, meaning
that no firm is a member of more than one industry.
The Economic Census asks businesses to report, among other
things, the total revenue they receive from sales. The Census
Bureau uses these revenue figures to determine which firms
constitute the top-four firms in each industry. It then calculates
what percentage of the revenue earned by the entire industry is
earned by the top-four firms. This gives us a useful indicator for
how much the top-four firms dominate their industry. If the
top-four firms receive most of the revenue, then we can conclude
that the industry is concentrated.
The graph shows
12 NAICS sectors and how concentrated they were in 2002. All of
the sectors lie along the diagonal line, since 2002 is our baseline
year and the two axes are currently the same. You can see that
some sectors earned significantly more revenue than others, as
indicated by the area of the circle.
You can hover over a sector to see more details.
The Utilities sector was the most concentrated NAICS sector in
2002, which may not come as a surprise. Within the sector, the
top-four firms in each industry earned 47% of the industry's
revenue on average. The Utilities sector includes firms involved in
power generation, natural gas distribution, water suppy, and sewage
The Information sector was the second-most concentrated NAICS
sector. Within the sector, the top-four firms in each industry
earned 46% of the industry's revenue on average. The
Information sector includes many tech firms but also newspaper
publishers, cable providers, internet service providers, and
Between 2002 and 2007, concentration grew slightly in most of
the NAICS sectors. The Information sector overtook the Utilities
sector to become the most concentrated sector. The Finance and
Insurance sector experienced the most concentration growth: It
went from a 38% concentration level to a 43%
concentration level over the five years.
All of the sectors also experienced growth in overall industry
revenue between 2002 and 2007.
Between 2007 and 2012, concentration again grew slightly in most
of the NAICS sectors. The Utilities sector reclaimed its position
as the most concentrated sector.
Over the decade between 2002 and 2012, we can see that, while
concentration mostly increased across the board, the increase was
small. In order to see more drastic changes, we need to drill down
to the industry level.
We are now looking at the individual NAICS industries within
all of our sectors.
In 2002, the top-four firms in the mean industry earned
25.6% of the revenue within the industry. But among
industries there is much more variation than among sectors—you can
see that in some industries the top-four firms earned over 80% of
By 2007, the top-four firms in the mean industry earned
26.8% of industry revenue. So on average the growth in
concentration was small. But in some industries concentration
The travel agency industry, for example, experienced a huge
amount of concentration growth. The top-four firms controlled
49% of revenues in 2002, more than double the amount of
revenue that they controlled in 2002.
Another five years later, in 2012, the top-four firms in the
mean industry controlled 27.3% of industry revenue. So while
the increase was again modest on average, some industries
experienced enormous consolidation.
Here we can see that the pension fund industry grew much more
concentrated over the ten years between 2002 and 2012. In 2002,
the top-four firms in this industry controlled only 14.2%
of industry revenue.
Many industries have become less concentrated since 2002. But
of the 369 industries displayed here, 228, or 62%, grew
more concentrated over the decade.
So there has been a small rise in concentration across the
board. But maybe the real danger is that there are particular
industries where concentration has been allowed to rise by so much.
In either case, the Economic Census data suggests that we ought to
start thinking carefully about how to preserve competition
between businesses in the United States.