The Economics of Intangible Capital

[Symposium: Intangible Capital]

By Nicolas Crouzet, Janice C. Eberly, Andrea L. Eisfeldt, and Dimitris Papanikolaou

Journal of Economic Perspectives, Summer 2022

Intangible assets are a large and growing part of firms' capital stocks. Intangibles are accumulated via investment--foregoing consumption today for output in the future—but they lack a physical presence. Rather than stopping with this "lack," we inst...

Dispersed Behavior and Perceptions in Assortative Societies

By Mira Frick, Ryota Iijima, and Yuhta Ishii

American Economic Review, September 2022

We formulate a model of social interactions and misinferences by agents who neglect assortativity in their society, mistakenly believing that they interact with a representative sample of the population. A key component of our approach is the interplay be...

Five Facts about the Distributional Income Effects of Monetary Policy Shocks

By Niklas Amberg, Thomas Jansson, Mathias Klein, and Anna Rogantini Picco

American Economic Review: Insights, September 2022

We document five facts about the distributional income effects of monetary policy shocks using Swedish administrative individual-level data. (i) The effects of monetary policy shocks are U shaped over the income distribution—that is, expansionary shocks...

Book Review: Entrenchment by Paul Starr

By Gilles Saint-Paul

Journal of Economic Literature, September 2022

Entrenchment: Wealth, Power, and the Constitution of Democratic Societies, by Paul Starr, revisits the history of political economy through the lens of a novel concept: that of entrenchment. Policies that benefit some interest groups may become e...

Why Is Europe More Equal than the United States?

By Thomas Blanchet, Lucas Chancel, and Amory Gethin

American Economic Journal: Applied Economics, October 2022

This article combines all available data to produce pretax and posttax income inequality series in 26 European countries from 1980 to 2017. Our estimates are consistent with macroeconomic growth and comparable with US distributional national accounts. Ine...

Your Place in the World: Relative Income and Global Inequality

By Dietmar Fehr, Johanna Mollerstrom, and Ricardo Perez-Truglia

American Economic Journal: Economic Policy, November 2022

Although there is abundant evidence on individual preferences for policies that reduce national inequality, there is very little evidence on preferences for policies addressing global inequality. To investigate the latter, we conducted a two-year, face-to...

Earnings Inequality and the Minimum Wage: Evidence from Brazil

By Niklas Engbom and Christian Moser

American Economic Review, December 2022

Increases in the minimum wage can substantially reduce earnings inequality. To demonstrate this, we combine administrative and survey data with an equilibrium model of the Brazilian labor market. We find that a 128 percent increase in the real minimum wag...

Rapid Dynamics of Top Wealth Shares and Self-Made Fortunes: What Is the Role of Family Firms?

By Andrew G. Atkeson and Magnus Irie

American Economic Review: Insights, December 2022

We derive an analytical link between the fast dynamics of inequality at the top of the wealth distribution and the prevalence of newly created fortunes. Specifically, in the context of a random growth model of wealth accumulation, the shape of the top of ...

Consumption Heterogeneity: Micro Drivers and Macro Implications

By Edmund Crawley and Andreas Kuchler

American Economic Journal: Macroeconomics, January 2023

We document heterogeneity in the marginal propensity to consume (MPC) across household characteristics relevant to understanding heterogeneous agent models and monetary policy transmission. We find a strong negative relationship between household liquid w...

A Risky Venture: Income Dynamics among Pass-Through Business Owners

By Jason DeBacker, Vasia Panousi, and Shanthi Ramnath

American Economic Journal: Macroeconomics, January 2023

We employ a large panel of US income tax returns for the period 1987–2018 to extensively characterize and quantify business income risk. Our findings show business income to be much riskier than labor income. Business income is less persistent and is ch...

Technology Gaps, Trade, and Income

By Thomas Sampson

American Economic Review, February 2023

This paper quantifies the contribution of technology gaps to international income inequality. I develop an endogenous growth model where cross-country differences in R&D efficiency and cross-industry differences in innovation and adoption opportunities to...

Monetary Policy and Inequality

[Symposium: Monetary Policy]

By Alisdair McKay and Christian K. Wolf

Journal of Economic Perspectives, Winter 2023

We ask three questions about the connection between monetary policy and inequality. First, does monetary policy affect inequality? While different households respond to changes in monetary policy for different reasons, we argue that the overall consumpt...

Income Segregation and the Rise of the Knowledge Economy

By Enrico Berkes and Ruben Gaetani

American Economic Journal: Applied Economics, April 2023

We analyze the effect of an increase in knowledge-intensive activities on spatial inequality in US cities. We leverage a predetermined network of patent citations to instrument for local innovation trends. Between 1990 and 2010, a one-standard-deviation i...

Land Misallocation and Productivity

By Chaoran Chen, Diego Restuccia, and Raül Santaeulàlia-Llopis

American Economic Journal: Macroeconomics, April 2023

Using detailed household-level data from Malawi on physical quantities of agricultural outputs and inputs, we measure farm total factor productivity (TFP), controlling for land quality, rain, and transitory shocks. We find that operated land size and capi...

The Trickling Up of Excess Savings

By Adrien Auclert, Matthew Rognlie, and Ludwig Straub

AEA Papers and Proceedings, May 2023

We provide a simple framework connecting the distribution of excess savings across households to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest marginal propensities to ...

Do Health Disparities Narrow with Pollution Disparities? Trends from California

By Danae Hernandez-Cortes and Kyle C. Meng

AEA Papers and Proceedings, May 2023

Pollution concentrations (PM2.5) in the United States have fallen in recent decades. Despite these improvements, disparities in concentrations between racial/ethnic groups persist. We combine administrative data on the universe of emergency roo...

Racial Gaps in Federal Flood Buyout Compensations

By Kay Jowers, Lala Ma, and Christopher D. Timmins

AEA Papers and Proceedings, May 2023

In a managed retreat, or "buyout," program, homeowners are offered their property's fair-market value to relocate from a flood-prone area. Using a nationwide sample of federal buyout acquisitions and the universe of US housing transactions over the last t...

The Incarceration Penalty and Black-White Economic Inequality: The Case of Baltimore

By Lauren Russell, Jorge N. Zumaeta, Aaron Colston, and William A. Darity Jr.

AEA Papers and Proceedings, May 2023

This paper investigates income and wealth gaps by household incarceration history within and across racial groups using the Blinder-Oaxaca decomposition. We study this in the context of 2017 Baltimore. We find that households exposed to incarceration have...

Technical Change and Superstar Effects: Evidence from the Rollout of Television

By Felix Koenig

American Economic Review: Insights, June 2023

Technical change that extends market scale can generate winner-take-all dynamics, with large income growth among top earners. I test this "superstar model" in the entertainer labor market, where the historic rollout of television creates a natural experim...

Should We Tax Capital Income or Wealth?

By Corina Boar and Virgiliu Midrigan

American Economic Review: Insights, June 2023

We study optimal capital income and wealth taxation in an economy that reproduces the importance of private businesses for output and inequality. If entrepreneurs are subject to collateral constraints, they face heterogeneous rates of return, which genera...