1. A Firm-Level Perspective on the Role of Rents in the Rise in Inequality

Furman, Jason; Orszag, Peter R.

doi:10.7312/guzm18672-003

Cited by 88 publications

(68 citation statements)

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“…This selection effect is quantitatively important for capital share dynamics. In a calibrated version of our model, we find that doubling the size of economic rents (see, for example, Furman and Orszag (2015), Barkai (2016), and De Loecker and Eeckhout (2017)) and increasing volatility from 20% to 40% replicates the increase in the aggregate capital share and the decrease in the average capital share. The joint increase in volatility and rents is essential to the quantitative performance of our model.…”

mentioning

confidence: 70%

Capital Share Dynamics When Firms Insure Workers

Hartman‐Glaser¹,

Lustig²,

Xiaolan

2019

The Journal of Finance

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Although the aggregate capital share of U.S. firms has increased, capital share at the firm‐level has decreased. This divergence is due to mega‐firms that produce a larger output share without a proportionate increase in labor compensation. We develop a model in which firms insure workers against firm‐specific shocks, with more productive firms allocating more rents to shareholders, while less productive firms endogenously exit. Increasing firm‐level risk delays exit and increases the measure of mega‐firms, raising (lowering) the aggregate (average) capital share. An increase in the level of rents magnifies this effect. We present evidence that supports this mechanism.

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confidence: 70%

Capital Share Dynamics When Firms Insure Workers

Hartman‐Glaser¹,

Lustig²,

Xiaolan

2019

The Journal of Finance

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“…People who enjoy privileged connections to rent-providing assets or jobs tend to become more well off, which in turn reduces social mobility by increasing the incentives among parents to pass on such connections to their offspring. Furman and Orszag (2018) argue that increase in income inequality in the US is also linked to increased dispersion of earnings between firms, with more and more firms enjoying super-normal returns to capital. Increasing market consolidation may be contributing to the increasing prevalence of firms with unusually high returns to capital.…”

Section: Usmentioning

confidence: 99%

China and the United States: Different economic models but similarly low levels of socioeconomic mobility

Weide¹,

Narayan²

2019

WIDER Working Paper

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The United States and China are the world's largest economies. Together they are responsible for about one-third of the world's economic output. This paper aims to examine whether the two economic giants are also lands of opportunity where resources are allocated in a way that minimizes unrealized human potential. Our analysis shows that despite stark differences in their levels of development, the US and China report remarkably similar levels of socioeconomic mobility; a level that is considered low by international standards. The US's level of socioeconomic mobility has historically been low, with little to no progress over the last three to four decades. Before it embarked on its transition from planned to market economy, socioeconomic mobility was relatively high in China. However, as it underwent a period of rapid economic growth, China's socioeconomic mobility declined significantly. The paper concludes that the world's two major economic powers have converged to a low level of socioeconomic mobility where talent from disadvantaged backgrounds is excluded from opportunities, plausibly implying unrealized human potential and misallocation of resources on a large scale.

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“…Our point of departure is a dual-market sorting equilibrium wherein households choose from a finite number of spatially bounded localities j = 1, 2, … , J in order to maximize utility (see Appendix C in the Supporting Information for a full specification of the model). Following the standard approach in the sorting literature, we use the properties of equilibrium to deduce a vector of amenity prices that implies identical levels of well-being across locations such that households cannot improve their utility by 18 See Furman (2015) and Furman and Orszag (2015) for a more detailed discussion of the link between land use regulation and inequality. 19 The indexing of government transfers to temporal changes in the cost of living is a widely accepted practice.…”

Section: Amenities and Housing Affordabilitymentioning

confidence: 99%

“…See Furman () and Furman and Orszag () for a more detailed discussion of the link between land use regulation and inequality.…”

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confidence: 99%

Amenities, affordability, and housing vouchers

Bieri

Dawkins

2018

Journal of Regional Science

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Against the background of an emerging rental affordability crisis, we examine how the standard rule that households should not spend more than 30% of their income on housing expenditures leads to inefficiencies in the context of federal low‐income housing policy. We quantify how the current practice of locally indexing individual rent subsidies in the Housing Choice Voucher (HCV) program regardless of quality‐of‐life conditions implicitly incentivizes recipients to live in high‐amenity areas. We also assess a novel scenario for housing policy reform that adjusts subsidies by the amenity expenditures of low‐income households, permitting national HCV program coverage to increase.

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1. A Firm-Level Perspective on the Role of Rents in the Rise in Inequality

Cited by 88 publications

References 0 publications

Capital Share Dynamics When Firms Insure Workers

Capital Share Dynamics When Firms Insure Workers

China and the United States: Different economic models but similarly low levels of socioeconomic mobility

Amenities, affordability, and housing vouchers

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