More regulations might cause more concentration

From Cafe Hayek.

"From page 174 of Johan Norberg’s excellent 2023 book, The Capitalist Manifesto (footnote deleted; link added): 

Complicated regulations create a fixed cost for established companies that they handle with divisions of specialists. But for startups with few employees and little capital, these regulations act as direct barriers to entry. Research on the US economy shows that market concentration grew the most in sectors where regulations increased the fastest."

Also see Declining Competition and Investment in the U.S. by Germán Gutiérrez & Thomas Philippon.

"The U.S. business sector has under-invested relative to Tobin's Q since the early 2000's. We argue that declining competition is partly responsible for this phenomenon. We use a combination of natural experiments and instrumental variables to establish a causal relationship between competition and investment. Within manufacturing, we show that industry leaders invest and innovate more in response to exogenous changes in Chinese competition. Beyond manufacturing we show that excess entry in the late 1990's, which is orthogonal to demand shocks in the 2000's, predicts higher industry investment given Q. Finally, we provide some evidence that the increase in concentration can be explained by increasing regulations."