Labor’s share of GDP has declined in industrialized countries over the past 30 years, meaning that a decreasing share of total income goes to workers while business owners receive more. While productivity has steadily increased, wages of nonsupervisory workers have stagnated and the share of start-ups in the total of all companies has steadily decreased since 1980. Does today’s market economy undermine democracy by producing increasingly unequal outcomes? Is the market economy broken? How can it be restored? What incentives, mechanisms, and regulations are needed?

Martin Schmalz is Professor of Finance and Economics and the Head of the Finance, Accounting, Management, and Economics Area at the University of Oxford Saïd Business School. He is co-author of the book "The Business of Big Data. How to Create Lasting Value in the Age of AI" and the Academic Director of the Blockchain Strategy and Open Banking & AI in Finance Programmes at Oxford. He previously held faculty positions at the University of Michigan's Stephen M. Ross School of Busines, where he was elected one of the “40 under 40” best business school professors worldwide at the age of 33. His research on how the ownership structure of firms affects firm behavior and market outcomes has affected policy-making and antitrust enforcement worldwide. His research has been published in the Journal of Political Economy, Journal of Finance, Journal of Financial Economics, and Review of Financial Studies, and discussed in the world's major media outlets, including BBC, Bloomberg, Financial Times, New York Times, and Wall Street Journal. He was invited to present to regulators and policy makers across the globe, including the US Department of Justice, The White House Council of Economic Advisers, European Commission, European Parliament, OECD, various central banks, and at universities across America, Europe, Asia, and Australia. He holds a master’s degree in mechanical engineering from the University of Stuttgart, Germany, and a PhD in Economics is from Princeton University, USA.

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Since 1980, the world economy has experienced an increase of dominant firms. Dominant firms face limited competition in their market and exert monopoly power. Why has this happened, and why did it start in 1980? The rise of dominant firms has a direct impact on customers who pay higher prices, but it also has far-reaching implications for the macroeconomy. Widespread market power leads to wage stagnation and a decline in the labor share, it increases wage inequality, it slows down business dynamism, it reduces the number of startup firms and lowers innovation.

In the public paper 'Dominant firms in the digital age', Jan Eeckhout reviews the determinants of the rise of dominant firms, discusses the causes and consequences, and proposes directions for policy solutions.

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