More Related Content

Slideshows for you(20)

Similar to How can competition contribute to fairer societies? – BAKER – November 2018 OECD GFC discussion(20)


More from OECD Directorate for Financial and Enterprise Affairs(20)


How can competition contribute to fairer societies? – BAKER – November 2018 OECD GFC discussion

  1. COMPETITION POLICY, MARKET POWER, AND INEQUALITY Jonathan B. Baker American University Washington College of Law OECD Global Forum on Competition Discussion on Competition and Fair Societies November 29, 2018
  2. Overview • Connecting two troubling secular trends • Growing inequality and growing market power • Competition policy targeting inequality • Options for discussion J. Baker OECD Global Forum on Competition 11-29-18 2
  3. Growing Inequality and Market Power: Social and Economic Costs • Growing inequality • Reduces economic growth • Tilts public policy to favor the interests of the wealthy • Undermines legitimacy of the social order • Objectionably morally • Growing market power • Harms in affected markets • Wealth transfers • Allocative efficiency losses • Wasteful rent seeking • Slowed innovation and productivity improvements • Economy-wide harms • Slowed economic growth • Increased inequality J. Baker OECD Global Forum on Competition 11-29-18 3
  4. Connecting the Trends: Market Power Increases Inequality • Producer surplus from market power accrues primarily to top executives & shareholders • In US: top 1% (in wealth) hold 50% of stock & mutual fund assets • Top 10% hold 91% (81% accounting for retirement plan ownership) • Decline of private sector unions in the US limits the extent to which workers can appropriate market power rents • Market power plausibly accounts for 10-25% of the wealth of the richest 10% of the population in OECD countries • Ennis & Kim (2016); Ennis, Gonzaga & Pike (2017) • Piketty: return to capital > economy’s growth rate • Piketty terms this divergence an “amplifier” for wealth inequality, for a given variance of other shocks • Market power increases the divergence J. Baker OECD Global Forum on Competition 11-29-18 4
  5. Market Power and Inequality: Further Comments • Market power contributes to inequality regardless of whether it is “legitimate” in current antitrust terms • Inequality is not just about market power • Many other factors also contribute to growing inequality • Some inequality is inevitable, though all do not necessarily benefit • Possible feedback in the other direction • If inequality tilts public policy, it could foster policies that protect or enhance market power J. Baker OECD Global Forum on Competition 11-29-18 5
  6. Competition policy targeting inequality: options for discussion • Strengthen competition enforcement overall • Increase competition agency budgets • Strengthen antitrust rules and enforcement to increase deterrence of anticompetitive conduct • Target inequality in the exercise of enforcement agency discretion • Prioritize cases where enforcement benefits the less advantaged and middle class • Including monopsony power exercised against workers and small businesses • Design remedies to benefit less advantaged victims • Recalibrate competition policy goals • Seek to prevent welfare losses to trading partners resulting from lessened rivalry, ignoring gains and losses to defendants • Recognize excessive pricing by dominant firms as an antitrust offense • Adopt reduction of inequality as an explicit competition policy goal J. Baker OECD Global Forum on Competition 11-29-18 6
  7. References • Jonathan B. Baker, The Antitrust Paradigm: Restoring a Competitive Economy • forthcoming in 2019 from Harvard University Press • • Jonathan B. Baker and Steven C. Salop, “Antitrust, Competition Policy and Inequality” • The Georgetown Law Journal Online, vol. 104, 2015, pp. 1-28 • reprinted in translation in Mercato Concorrenza Regole, no. 1, 2016, pp. 7-34 • Sean F. Ennis and Yunhee Kim, “Market Power and Wealth Distribution” • OECD and World Bank Group, A Step Ahead: Competition Policy for Shared Prosperity and Inclusive Growth, 2017, pp. 133–154. • Sean F. Ennis, Pedro Gonzaga, and Chris Pike, “Inequality: A Hidden Source of Market Power” • OECD, 2017, • Harry First and Eleanor M. Fox, “Philadelphia National Bank, Globalization, and the Public Interest” • Antitrust Law Journal, vol. 80, no. 2, 2016, pp. 307–351. J. Baker OECD Global Forum on Competition 11-29-18 7