Weak competition not only leads to lower efficiency, but also results 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 due not only to familiar reasons in the literature, most notably shifts in market power, but also to changes in the socioeconomic makeup of ownership. Over the past twenty years, households in the bottom 90% 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 that aim to reverse existing trends by broadening ownership of public corporations among 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 toward more equal ownership of corporations by the public.
Policies to mitigate unequal ownership are desirable for two main reasons. First, expanding ownership would 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 that promote equal ownership of corporations can complement existing policies, such as antitrust and regulation, and offer potentially consequential advantages.
