Energy and Environmental Economics and Policy Seminar
Rigoberto Lopez is the Richard DelFavero Professor of Agricultural and Resource Economics at the University of Connecticut. His areas of expertise include food marketing, agricultural policy, and industrial organization. He is the co-editor of Agribusiness and International Journal and associate editor of Applied Economics. Lopez was the director and founder of the Zwick Center of Food and Resource Policy. Current research projects include concentration and competition in the U.S. food system, COVID-19 and climate change impacts on diet quality, and consumer behavior with respect to labeling and new food products.
This paper explores the evolution of productivity and markups in the U.S. food and beverage manufacturing industries over time and provides some preliminary explanations for the increasing gaps between revenues and variable costs. We first examine the evolution of labor cost shares and the ratios of revenues to costs using U.S. census data from the NBER-CES database for 55 food and beverage industries at the 6-digit NAICS level. We find that estimated labor cost shares are decreasing, suggesting increasing labor efficiency, but the ratios of revenues to costs are increasing. We then estimate a Hicks- neutral translog production function with unobserved productivity shocks and labor- augmenting productivity. We confirm both the fall of labor revenue shares (something that has attracted the interest of macroeconomists in explaining increasing income inequality) and the increase in the ratios of revenues over variable costs (showing gross markups) over time, the latter being consistent with recent findings for the entire U.S. manufacturing sector. In addition, we find that the decline in labor shares is persistent. We then test for alternative explanations for these trends. We conclude that accounting for changes in relative prices, allowing for labor-augmenting productivity growth, and addressing the possible omission of “new” or “missing” inputs, can explain many of these trends.