General equilibrium oligopoly and ownership structure
Keywords: 
Common ownership
Portfolio
Diversification
Macro economy
Corporate governance
Labor share
Market power
Oligopsony
Antitrust policy
Copropiedad
Cartera
Diversificación
Macroeconomía
Gobierno corporativo
Participación del trabajo
Poder del mercado
Oligopsonio
Política antimonopolio
Issue Date: 
May-2021
Publisher: 
Econometric Society
ISSN: 
1468-0262
Citation: 
Econometrica 2021, Vol. 89 (3) 999-1048
Abstract
We develop a tractable general equilibrium framework in which firms are large and have market power with respect to both products and labor, and in which a firm's decisions are affected by its ownership structure. We characterize the Cournot–Walras equilibrium of an economy where each firm maximizes a share‐weighted average of shareholder utilities—rendering the equilibrium independent of price normalization. In a one‐sector economy, if returns to scale are non‐increasing, then an increase in “effective” market concentration (which accounts for common ownership) leads to declines in employment, real wages, and the labor share. Yet when there are multiple sectors, due to an intersectoral pecuniary externality, an increase in common ownership could stimulate the economy when the elasticity of labor supply is high relative to the elasticity of substitution in product markets. We characterize for which ownership structures the monopolistically competitive limit or an oligopolistic one is attained as the number of sectors in the economy increases. When firms have heterogeneous constant returns to scale technologies, we find that an increase in common ownership leads to markets that are more concentrated.
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