Superstar firms - more harm than good? ⭐️ Eliana Garcés

There is increasing evidence that, because of technological change and globalization, more and more companies nowadays have market power that they can exploit to their advantage. This raises several questions: Do these “superstar” companies undermine competition? Do they hold the wages of workers down? Do they endanger the prosperity of society? And if so, what can we do about it? Should we break the firms up into smaller companies, as many are demanding?
Dr. Eliana Garcés is a Director in the Economic Policy group at Meta (Facebook). She has a long experience in antitrust and regulatory issues in both the public and private sectors. She started her public career as a member of the Competition Chief Economist Team at the European Commission and later served in the Cabinet of European Commission Vice President for Competition Joaquin Almunia. Dr. Garcés also served as Deputy Chief Economist in the European Commission’s Directorate General for Internal Market and Industry where she worked on European industrial competitiveness. From 2016 to 2017, she was a Visiting Senior Fellow at George Mason University, where she taught and researched regulatory aspects of digital innovation both in the United States and Europe. She was a Principal at The Brattle Group until she joined Facebook in 2019.
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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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