Inequality and Market Concentration, when Shareholding is More Skewed than Consumption

17 Pages Posted: 14 Dec 2018

See all articles by Joshua Gans

Joshua Gans

University of Toronto - Rotman School of Management

Andrew Leigh

Australian House of Representatives Parliament House; Centre for Applied Macroeconomic Analysis, ANU; IZA

Martin C. Schmalz

University of Oxford - Finance; CEPR; CESifo; European Corporate Governance Institute (ECGI)

Adam Triggs

Australian National University (ANU) - Crawford School of Public Policy

Date Written: December 13, 2018

Abstract

Economic theory suggests that monopoly prices hurt consumers but benefit shareholders. But in a world where individuals or households can be both consumers and shareholders, the impact of market power on inequality depends in part on the relative distribution of consumption and corporate equity ownership across individuals or households. The paper calculates this distribution for the United States, using data from the Survey of Consumer Finances and the Consumer Expenditure Survey, spanning nearly three decades from 1989 to 2016. In 2016, the top 20 percent consumed approximately as much as the bottom 60 percent, but had 13 times as much corporate equity. Because ownership is more skewed than consumption, increased mark-ups increase inequality. Moreover, over time, corporate equity has become even more skewed relative to consumption.

Keywords: Monopoly, market power, inequality

JEL Classification: D42, D43, D61, D63

Suggested Citation

Gans, Joshua and Leigh, Andrew and Schmalz, Martin C. and Triggs, Adam, Inequality and Market Concentration, when Shareholding is More Skewed than Consumption (December 13, 2018). CAMA Working Paper No. 62/2018. Available at SSRN: https://ssrn.com/abstract=3301054 or http://dx.doi.org/10.2139/ssrn.3301054

Joshua Gans

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Andrew Leigh (Contact Author)

Australian House of Representatives Parliament House ( email )

Canberra, 2600
Australia

Centre for Applied Macroeconomic Analysis, ANU ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

IZA ( email )

Martin C. Schmalz

University of Oxford - Finance ( email )

United States

CEPR ( email )

London
United Kingdom

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Adam Triggs

Australian National University (ANU) - Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

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