Ownership Structure and Economic Growth
Mr Okumura Koki
Ph.D. Candidate in Economics
UCLA
This paper examines how the rise of common ownership affects economic growth and social welfare. We develop an endogenous growth model that embeds three inter-firm networks: ownership, product-market rivalry, and technology spillovers. In the model, a large number of oligopolistic firms make forward-looking R&D investment decisions, taking into account externalities operating through product-market competition and technological spillovers, as well as the value of other firms in which common owners hold stakes. We estimate the model using data on more than 700 publicly traded U.S. firms with patents. Our counterfactual analysis shows that the observed increase in common ownership between 1999 and 2017 reduced the annual growth rate by 0.12 percentage points and social welfare by 0.6%. This finding suggests that, under common ownership, the internalization of the negative externality from innovation that reduces competitors’ market shares dominates the internalization of the positive externality associated with technological spillovers.
