  How much has market power increased in the United States in the last fifty
years? And how did the rise in market power affect aggregate profits? Using
micro-level data from U.S. Compustat, we find that several indicators of market
power have steadily increased since 1970. In particular, the aggregate markup
has gone up from 10% of price over marginal cost in 1970 to 23% in 2020, and
aggregate returns to scale have risen from 1.00 to 1.13. We connect these
market-power indicators to profitability by showing that the aggregate profit
share can be expressed in terms of the aggregate markup, aggregate returns to
scale, and a sufficient statistic for production networks that captures double
marginalization in the economy. We find that despite the rise in market power,
the profit share has been constant at 18% of GDP because the increase in
monopoly rents has been completely offset by rising fixed costs and changes in
technology. Our empirical results have subtle implications for policymakers:
overly aggressive enforcement of antitrust law could decrease firm dynamism and
paradoxically lead to lower competition and higher market power.
