Some institutional design for shareholder socialism

Abstract

In times of a declining labour share and an intense international tax competition, some form of market socialism may contribute to hold income inequality in check. However, the concept of market socialism involves three major pitfalls: cronyism, technological stagnation, and power concentration. These pitfalls could be avoided by an appropriate institutional design that includes the combination of public ownership with an extensive use of the stock market, an incentive-compatible mechanism for the takeover of private firms, and participatory democracy.