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Over the past 40 years, the US has seen rising market power, slowing productivity growth, and deepening wealth inequality. @gimpulli.bsky.social (@uniofnottingham.bsky.social) and Pontus Rendahl explore how declining competition may be the common culprit.
Originally featured in VoxEU.
Non-technical write-up of my work with Pontus Rendahl on the impact of market power on economic growth and wealth inequality.
The consequences for households wellbeing? The poor get hit with a double whammy—stagnant wages and a rising wealth gap. Meanwhile, the top 1% (especially the top 0.1%) keep pulling ahead.
Market power also crushes wages. Less competition means profits take a bigger share, while lower productivity growth weakens future wage increases.
In contrast, low-income households, reliant on wages and lacking substantial savings, see little benefit. Many cannot save at all or only save for emergencies, making them less responsive to rising returns.
Why? Because the rich and poor react differently to changes in returns. The wealthy, who own most assets, benefit directly from higher returns, compounding their wealth.
As firms gain dominance, markups increase, driving up corporate profits and boosting asset returns (r). Meanwhile, reduced competition stifles innovation and productivity growth (g). This widening gap between asset returns and economic growth—r - g—exacerbates wealth inequality.
How does rising market power affect growth and the distribution of wealth? With
@pontus_rendahl
we explore these links in our new paper, cepr.org/publications..., @cepr.org
#growth, #inequality, #markups. A thread.