Productivity and inequality
Firms, both within countries and within sectors in the same country, are becoming increasingly unequal: the most productive ones are forging ahead leaving the rest behind. In particular, the productivity gap between between firms in the “top 10% by productivity and those in the bottom 10% increased by approximately 14% from 2001 to 2012”. Berlingieri and al reach this conclusion after working on a new OECD data that is representative of the whole population of businesses in 16 countries. This productivity differential across firms, they add, can account for almost half the wage inequality among firms in the same sector: “The real engine fueling rising income inequality is firm-level inequality.”
A Study of 16 Countries Shows That the Most Productive Firms (and Their Employees) Are Pulling Away from Everyone Else
By: Giuseppe Berlingieri, Patrick Blanchenay, Chiara Criscuolo – OECD
The political power of the big firms
In the last twenty years more than 75 percent of US industries experienced an increase in concentration levels: the size of the average publicly listed company tripled in market capitalization as it went from $1.2 billion to $3.7 billion in 2016 dollars. There are two reasons for this phenomenon: a) a reduction in the founding of new firms; b) a very high level of mergers and acquisitions wich at times exceeding $2 trillion in value per year. In this paper Zingales argues that “the greater their market power, the more effective they are at obtaining what they want from the political system. But the more effective they are at obtaining what they want from the political system, the greater their market power will be, since they can block competitors and entrench themselves. Hence, the risk of the Medici’s vicious circle.” As this trend spreads around the world and certain corporations’ size now exceeds the size of small and medium size countries, how these companies deal with the institutions of these states can pose economic and political risks even for the large high-income economies
Towards a Political Theory of the Firm
By: Luigi Zingales – University of Chicago
