Restoring competition in the digital economy

drop in labor’s share of income.

This increased market concentration is widening the gap between the firms that own the robots ( capital) and the workers whom the robots are replacing ( labor). But confronting it will require us to reinvent antitrust for the digital age. As it stands, national competition authorities in G20 countries are inadequately equipped to regulate corporations that operate globally.

Moreover, the G20 cannot simply trust that global competition will correct on its own the tendency toward increased market concentration. As Andrew Bernard has shown for the US and Thierry Mayer and Gianmarco Ottaviano have demonstrated for Europe, international trade favors large superstar firms. Indeed, globalization may provide advantages to the largest and most productive firms in each industry, causing them to expand — and forcing smaller and less productive firms to exit. As a result, industries become increasingly dominated by superstar firms with a low share of labor in value added.

The US is a case in point. It is host to many of today’s superstar firms, and yet US antitrust regulators have not been able to restrain those firms’ market power. As the G20 looks for ways to address the problem of market concentration, it should take lessons from the US experience, and look for ways to improve upon the US failures.

Rather than starting from scratch, we will need to build on nationallevel competition authorities’ institutional knowledge, and include experienced personnel in the process. The European Competition Network can serve as a blueprint for a G20- level network.

The objective of a world competition network is to build an effective legal framework to enforce competition law against companies engaging in cross- border business practices that restrict competition. The network may coordinate investigations and enforcement decisions and develop new guidelines for how to monitor market power and collusive practices in a digital economy.

In the past, the G20 has focused on ensuring that multinational firms are not able to take advantage of jurisdictional differences to avoid paying taxes. But the G20 now needs to expand its scope, by recognizing that digital technologies are creating market outcomes that, if unchecked by a new World Competition Network, will continue to favor multinational firms at the expense of workers. Dalia Marin is chair of international economics at the University of Munich and a senior research fellow at Breugel, the Brussels-based economic think tank. Project Syndicate