Abstract
Abstract I discuss how firms contribute to inequality in the UK as laid out in the article in this collection by De Loecker, Obermeier and Van Reenen. As in other economies around the world, the UK has seen a rise in market power since 1980 leading to an increase in inequality of firm sizes. While firm inequality per se is not harmful, when it is driven by market power, it does have major implications for the labour market. This commentary examines the effect of the firm size distribution and market power on the labour share, declining labour dynamism and wage inequality. I also outline policy responses that reduce inequality and increase economy-wide well-being.
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