Unequal Ownership

Abstract

Market concentration and weak competition do not just lead to lower efficiency but also result in corporate profits flowing primarily to wealthy households that own a disproportionate share of public corporations. We demonstrate that this is a growing distributional problem not only due to familiar reasons in the literature, most notably shifts in market power, but also due to changes in the socio-economic makeup of ownership. Over the past twenty years, households in the bottom 90 percent of wealth have seen their share of stock ownership decline by half. That is, the ownership of corporations has become increasingly concentrated among the wealthy at a time when corporations are arguably extracting ever more surplus from consumers and workers. 

This Article seeks to situate the distribution of ownership at the center of policies to address the impact of declining competition. The gist of our proposal is that policies to reverse existing trends by broadening the ownership of public corporations to middle- and low-income households may help mitigate the harmful consequences of market power. The general objective of such policies would be to bring the distribution of ownership closer towards more equal ownership of corporations by the public. 

Policies to mitigate unequal ownerships are desirable for two main reasons. First, the simplest effect of expanding ownership would be to enable a broader array of stakeholders to benefit from the excess profits earned by firms in concentrated markets. Second, we demonstrate theoretically that if corporate stakeholders, particularly consumers and workers, own shares in public corporations, managers may offer more competitive prices and wages, to the extent that managers internalize the interests of their owners. Accordingly, policies to promote equal ownership of corporations can serve as a complimentary policy tool to existing policies, such as antitrust and regulation, and offers potentially consequential advantages.