Harvard Business Review:
Corporate inequality is the defining fact of business today
11 May 2016
It's safe to say that a significant part of the growing gap in how well different firms pay can be attributed to the latter ''talent sorting effect'' - but exactly how much continues to be debated. ... Work by Nicholas Bloom of Stanford finds an even larger role: His analysis suggests that this worker sorting effect can explain the bulk of the increase of inequality in the U.S., with the exception of the rise of the 1%. ...
Evidence of this trend toward greater corporate inequality has been trickling in for a while now. ... in 2007 Giulia Faggio and John Van Reenen of the London School of Economics and Kjell G. Salvanes of the Norwegian School of Economics and Business Administration reported that the productivity gap between firms had risen in the UK between 1984 and 2001, and that this phenomenon was linked to income inequality. ...
But there's a pessimistic synthesis between the competition and concentration stories. Perhaps the gap between firms starts out as the inevitable result of competition. Firms concentrate on what they're good at, adopt new technology, and deliver products and services more efficiently. Having reached those heights, they then cement their status through lobbying or M&A. ''Once those firms get there, it may be that they can actually draw up the drawbridge,'' said [John] Van Reenen. Maybe competition creates corporate inequality. But maybe it's lack of competition that preserves it.
This article was published by the Harvard Business Review on May 11, 2016
Link to article here
Related publications
The Evolution of Inequality in Productivity and Wages: Panel Data Evidence, Giulia Faggio, Kjell G. Salvanes and John Van Reenen, Centre for Economic Performance Discussion Paper No.821, August 2007
Nicholas Bloom CEP publications can be seen here
Related links
Nicholas Bloom webpage
Giulia Faggio webpage
John Van Reenen webpage
Growth Programme webpage