wall street occupations many finance jobs entail the risk of large losses and hard to monitor effort we analyze the equilibrium consequences of these features in a model with optimal dynamic contracting we show that finance jobs feature high compensation up or out promotion and long work hours and are more attractive than other jobs moral hazard problems are exacerbated in booms even though pay increases employees whose talent would be more valuable elsewhere can be lured into finance jobs while the most talented employees might be unable to land these jobs because they are too hard to manage

bonus culture competitive pay screening and multitasking to analyze the impact of labor market competition on the structure of compensation we embed multitasking and screening within a hotelling framework competition for talent leads to an escalation of performance pay shifting effort away from long term investments risk management and cooperation efficiency losses can exceed those from a single principal who dulls incentives to extract rents as competition intensifies monopsonistic underincentivization of low skill agents first decreases and then gives way to growing overincentivization of high skill ones aggregate welfare is thus hill shaped while inequality tends to rise monotonically bonus caps can help restore balance in incentives but may generate other distortions

income inequality in france 1901 1998 this paper uses data from income tax returns 1915 98 wage tax returns 1919 98 and inheritance tax returns 1902 94 in order to compute homogeneous yearly estimates of income wage and wealth inequality for twentieth century france the main conclusion is that the decline in income inequality that took place during the first half of the century was mostly accidental in france and possibly in a number of other countries as well wage inequality has been extremely stable in the long run and the secular decline in income inequality is for the most part a capital income phenomenon holders of large fortunes were badly hurt by major shocks during the 1914 45 period and they were never able to fully recover from these shocks probably because of the dynamic effects of progressive taxation on capital accumulation and pretax income inequality

a field study of sales forecasting accuracy and processes abstract as might be expected surveys show accuracy is the most important criterion in selecting a forecasting strategy this may lead to the expectation that computer based software would be used to aid the forecasting effort however despite the wide availability of forecast software management judgement appears to be the preferred method this leads to the question does management judgement provide the most accurate forecast estimates this paper reports a field study of judgemental sales forecasting over thirteen manufacturing organisations to investigate whether these forecasts are accurate unbiased and efficient and whether better ex ante forecasts could have been developed using a computer based model the study shows that the company forecasts were not uniformly more accurate than a simple un seasonally adjusted naive forecast most of the source of error is due to both inefficiency a serial correlation in the errors and bias in the forecasts these two factors seemed to mask any contribution of contextual information to accuracy the results are also discussed in terms of forecasting objectives the organisations may have other than accuracy

positive and normative judgments implicit in u s tax policy and the costs of unequal growth and recessions calculating the welfare implications of changes to economic policy or shocks requires economists to decide on a normative criterion one approach is to elicit the relevant moral criteria from real world policy choices converting a normative decision into a positive inference as in the recent surge of inverse optimum research we find that capitalizing on the potential of this approach is not as straightforward as we might hope we perform the inverse optimum inference on u s tax policy from 1979 through 2010 and argue that the results either undermine the normative relevance of the approach or challenge conventional assumptions upon which economists routinely rely when performing welfare evaluations

wages and human capital in the u s financial industry 1909 2006 we study the allocation and compensation of human capital in the u s finance industry over the past century across time space and subsectors we find that financial deregulation is associated with skill intensity job complexity and high wages for finance employees all three measures are high before 1935 and after 1980 but not in the interim period workers in the finance industry earn the same education adjusted wages as other workers until 1990 and significantly more afterward by 2006 the premium is 40 on average and 200 for top earners and ceos earnings risk and firm size effects account for some of the premium but the majority does not appear to be sustainable

flooded with debt this study explores if natural disasters are able to trigger a sovereign debt default natural disasters make the debt of a country less sustainable as they worsen the public finances of a country the main findings from our empirical analysis clearly indicate that large scale natural disasters increase significantly the onset probability of a sovereign debt default by about three percentage points it turns out that particularly major earthquakes and storms raise the likelihood of a default as they create the most widespread damage reported worldwide this will limit the debt servicing opportunities of a country in the future

two decades of income inequality in britain the role of wages household earnings and redistribution we study earnings and income inequality in britain over the past two decades including the period of relatively inclusive growth from 1997 to 2004 and the great recession we focus on the middle 90 where trends have contrasted strongly with the new inequality at the very top household earnings inequality has risen driven by male earnings although a catch up of female earnings did hold down individual earnings inequality and reduce within household inequality nevertheless net household income inequality fell due to deliberate increases in redistribution the tax and transfer system s insurance role during the great recession falling household worklessness and rising pensioner incomes

levels and trends in u s income and its distribution a crosswalk from market income towards a comprehensive haig simons income approach recent research on u s levels and trends in income inequality varies substantially based on how these studies measure income we crosswalk move between standards from a market income of tax units to a more comprehensive measure of income including realized capital gains of households using a unified data set and replicate common findings in the literature by using a comprehensive income definition in the spirit of haig simons considering yearly accrued capital gains rather than focusing on the delayed reporting of capital gains that appear in internal revenue service tax return data the observed growth in income inequality and top income shares since 1989 is dramatically reduced

decomposing the macroeconomic effects of natural disasters a national income accounting perspective abstract there is an unresolved debate as to whether natural disasters present true obstacles to a country s economic growth and development given that the empirical evidence is rather heterogeneous in this paper we explore whether aggregate analyses are likely to mask different responses of the components export and import government consumption investment and private consumption of gross domestic product gdp to this end we assembled a panel data set of hurricane strikes and national income accounting data for 21 caribbean countries for the period 1970 2011 we used a panel vector autoregressive varx model to take account of the direct impact of the storm shocks and any feedback mechanisms our results suggest that the responses on each gdp component differ widely where we find some effects on export import public consumption investment and private consumption however the differences in timing and directions of these impacts demonstrate why it may be difficult to find any clear and large net aggregate impact of hurricanes and natural disasters in general on gdp

are younger generations higher carbon emitters than their elders inequalities generations and co2 emissions in france and in the usa abstract proper understanding of the determinants of household co2 emissions is essential for a shift to sustainable lifestyles this paper explores the impacts of date of birth and income on household co2 emissions in france and in the usa direct co2 emissions of french and american households are computed from consumer budget surveys over the 1980 2000 time period age period cohort estimators are used to isolate the generational effect on co2 emissions i e the specific effect of date of birth independent of the age the year and other control variables the paper shows that french 1935 55 cohorts have a stronger tendency to emit co2 than their predecessors and followers the generational effect is explained by the fact that over their lifespan french baby boomers are better off than other generations and live in energy and carbon inefficient dwellings in the usa the absence of a generational effect on co2 emissions can be explained by the fact that intergenerational income inequalities are weaker than in france persistence of the generational effect once income and housing type is controlled for in france can be explained by the difficulty for french 1935 55 cohorts to adapt to sober energy consumption patterns

bailouts and the optimal taxation of bonus pay abstract this paper argues that the possibility of bailouts to financial intermediaries distorts the supply price of capital and creates an argument for taxing financial bonuses separately from other sources of income we develop a model of financial contracting where intermediaries compete for workers whose actions affect productivity and risk taking in the financial sector this derives the second best optimum and market equilibrium the optimal taxes that we propose increase both equity and efficiency compared to the pure market outcome

the income and tax share of very high income households 1960 1995 this paper presents new information on the fraction of adjusted gross income and of wages and salaries that is reported by taxpayers in the top one half of one percent of the income distribution this corresponds to roughly five hundred thousand households in the late 1990s this paper relies on data from the treasury s individual income tax model for the period 1960 1995 the definition of adjusted gross income is standardized so that changes in the tax law do not affect the measured concentration of agi the results suggest that the share of agi reported by the highest income households increased significantly between the early 1980s and the mid 1990s with most of the increase taking place in the years immediately following the tax reform act of 1986 while we find some evidence of transitory changes in the concentration of income around major tax changes which may be the result of income retiming by high income taxpayers re timing does not seem to explain most of the changes since 1986 this abstract was borrowed from another version of this item

top incomes in germany and switzerland over the twentieth century this paper presents new homogeneous series on top income shares in germany 1891 1998 and switzerland 1933 1995 using data from income tax returns the general pattern is consistent with recent results for france the secular decline in income inequality is for the most part an accidental capital income phenomenon very top incomes were badly hurt by the major shocks of the 1914 1945 period and never fully recovered afterwards since 1945 top income shares have been relatively stable with no rise during recent years unlike in the u s the striking episode before wwii is how nazi power brought top income shares to almost double within five years the striking result after wwii is that german top incomes are more concentrated within the top decile than in other industrialized countries thus the german super rich were richer than their american counterparts until the 1990s this puzzle is related to the much lower inheritance tax rates observed in germany since wwii jel n33 n34 h23 h24 h23 h24 h23 h24 h23 h24

growth de regulation and rent seeking in post war british economy abstractpost war political consensus about the need for government action to rectify market failure began to unravel in the 1970s and even the need for prudential control of banking and finance began to be challenged by the start of the 1980s regulatory oversight was relaxed in the belief that emerging techniques in financial engineering would render irrelevant fears of sharp periodic downturns that have historically been the consequence of lightly regulated finance the outcome of this new policy embracing the idea of unregulated markets to deliver greater prosperity is disappointing we find that the average growth rate of uk gdp and output per person employed for three decades from the start of liberalization was no greater than that in the previous three post war decades cyclical fluctuations were deeper a remarkable feature of the second period is the sharp rise in income inequality in favour of the very top earners an illusion of greater prosperity for a wider segment may have been created in

on the long run evolution of inheritance france 1820 2050 this paper attempts to document and account for the long run evolution of inheritance we find that in a country like france the annual flow of inheritance was about 20 25 of national income between 1820 and 1910 down to less than 5 in 1950 and back up to about 15 by 2010 a simple theoretical model of wealth accumulation growth and inheritance can fully account for the observed u shaped pattern and levels using this model we find that under plausible assumptions the annual bequest flow might reach about 20 25 of national income by 2050 this corresponds to a capitalized bequest share in total wealth accumulation well above 100 our findings illustrate the fact that when the growth rate g is small and when the rate of return to private wealth r is permanently and substantially larger than the growth rate say r 4 5 vs g 1 2 which was the case in the 19th century and early 20th century and is likely to happen again in the 21st century then past wealth and inheritance are bound to play a key role for aggregate wealth accumulation and the structure of lifetime inequality contrarily to a widely spread view modern economic growth did not kill inheritance

social class and income inequality in the united states ownership authority and personal income distribution from 1980 to 2010 this study outlines a theory of social class based on workplace ownership and authority relations and it investigates the link between social class and growth in personal income inequality since the 1980s inequality trends are governed by changes in between class income differences changes in the relative size of different classes and changes in within class income dispersion data from the general social survey are used to investigate each of these changes in turn and to evaluate their impact on growth in inequality at the population level results indicate that between class income differences grew by about 60 since the 1980s and that the relative size of different classes remained fairly stable a formal decomposition analysis indicates that changes in the relative size of different social classes had a small dampening effect and that growth in between class income differences had a large inflationary effect on trends in personal income inequality

extreme wage inequality pay at the very top we provide new evidence on the growth in pay at the very top of the wage distribution in the united kingdom sectoral decompositions show that workers in the financial sector have accounted for the majority of the gains at the top over the last decade new results are also presented on the pay of ceos in the united kingdom we show how improved measurement of pay points to a stronger pay performance link than previously estimated this link is stronger and more symmetric for those firms in which institutional investors play a larger role

are external shocks responsible for the instability of output in low income countries external shocks such as commodity price fluctuations natural disasters and the role of the international economy are often blamed for the poor economic performance of low income countries the author quantifies the impact of these different external shocks using a panel vector autoregression var approach and compares their relative contributions to output volatility in low income countries vis a vis internal factors he finds that external shocks can only explain a small fraction of the output variance of a typical low income country internal factors are the main source of fluctuations from a quantitative perspective the output effect of external shocks is typically small in absolute terms but significant relative to the historic performance of these countries

income inequality in the united states 1913 1998 this paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the united states using individual tax returns data top income and wages shares display a u shaped pattern over the century our series suggest that the large shocks that capital owners experienced during the great depression and world war ii have had a permanent effect on top capital incomes we argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks top wage shares were flat before world war ii dropped precipitously during the war and did not start to recover before the late 1960s but are now higher than before world war ii as a result the working rich have replaced the rentiers at the top of the income distribution

social information and selfishness abstract when decision makers are informed about the decisions of their peers does this make them more selfish or more generous we study the effect of social information on selfishness as measured by dictator game giving in a twice repeated setting we vary whether or not dictators receive information about the allocation decisions of other dictators independently we vary whether being the dictator is determined randomly or earned we find that dictators act more generously in the first round with than without social information in case dictator positions are randomly assigned no such effect is found in case dictators positions are earned allocations in the second round are generally more selfish than those in the first round this effect is significantly stronger with than without social information indicating that being informed about the decisions of their peers makes dictators more selfish these results indicate that transparency about allocation decisions is unlikely to make such decisions more generous

inequality and its discontents inequality in the distribution of income and wealth has come to the fore as a core concern across the industrialized world here we examine what has happened to income inequality across the rich countries in recent decades we discuss the range of factors that appear to be driving inequality upwards notably the role of technological change globalization and national institutions and policies we look at how rising inequality might undermine economic growth and squeeze the middle and assess the extent to which it has actually done so we assess whether rising inequality is associated with worsening outcomes and inequalities across various social domains finally we review emerging evidence on the role that rising inequality may be playing in the revolt of the angry and rise of populism

pareto and piketty the macroeconomics of top income and wealth inequality abstract since the early 2000s research by thomas piketty emmanuel saez and their coauthors has revolutionized our understanding of income and wealth inequality in this paper i highlight some of the key empirical facts from this research and comment on how they relate to macroeconomics and to economic theory more generally one of the key links between data and theory is the pareto distribution the paper describes simple mechanisms that give rise to pareto distributions for income and wealth and considers the economic forces that influence top inequality over time and across countries for example it is in this context that the role of the famous r g expression is best understood

note on adjustments to analysts earnings forecasts based upon systematic cross sectional components of prior period errors this study assesses the effectiveness of using systematic components of cross sectional forecast errors from prior years in order to adjust current analysts earnings forecasts the empirical results document that a significant component of the cross sectional mse in analysts forecasts is systematic and that parameter estimates from earlier periods enable the elimination of a substantial portion of the systematic errors in current forecasts further improvements in forecast accuracy are attained by the incorporation of prior year excess security returns in order to reduce unsystematic error

the effect of marginal tax rates on taxable income a panel study of the 1986 tax reform act this paper uses a treasury department panel of more than 4 000 taxpayers to estimate the sensitivity of taxable income to changes in tax rates on the basis of a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform the analysis emphasizes that the response of taxable income involves much more than a change in the traditional measures of labor supply the evidence shows an elasticity of taxable income with respect to the marginal net of tax rate that is at least one and could be substantially higher the implications for recent tax rate changes are discussed

analytical debiasing of corporate cash flow forecasts abstract we propose and empirically test statistical approaches to debiasing judgmental corporate cash flow forecasts accuracy of cash flow forecasts plays a pivotal role in corporate planning as liquidity and foreign exchange risk management are based on such forecasts surprisingly to our knowledge there is no previous empirical work on the identification statistical correction and interpretation of prediction biases in large enterprise financial forecast data in general and cash flow forecasting in particular employing a unique set of empirical forecasts delivered by 34 legal entities of a multinational corporation over a multi year period we compare different forecast correction techniques such as theil s method and approaches employing robust regression both with various discount factors our findings indicate that rectifiable mean as well as regression biases exist for all business divisions of the company and that statistical correction increases forecast accuracy significantly we show that the parameters estimated by the models for different business divisions can also be related to the characteristics of the business environment and provide valuable insights for corporate financial controllers to better understand quantify and feedback the biases to the forecasters aiming to systematically improve predictive accuracy over time

income inequality the consequences of skill upgrading when firms have hierarchical organizational structures during the last three decades most developed countries have experienced increasing income inequality using danish register data from 1992 to 2007 for all private sector employees we confirm that income inequality has increased in denmark we also observe an increase in the relative employment of highly educated individuals as well as differential income growth rates across employee subgroups where in particular managers experienced significant real income progression we use an equilibrium search framework with on the job search to derive the income distribution in this model we can determine the management and education premia we can also show that when our model is exposed to skill upgrading it is capable of producing income dynamics similar to those observed in the danish income distribution jel j3 j6 m5

differential taxation and occupational choice we develop a framework to study optimal sector specific taxation where each agent chooses an occupation by comparing her skill differential with the tax burden differential across sectors because skills are not perfectly transferable the diamond mirrlees theorem according to which the second best entails production efficiency fails social welfare can be increased by inducing some agents to join the sector in which their productivity is not the highest at the optimum income taxes balance the marginal losses from inter sector migration with the marginal gains from tailoring tax schedules to the distribution of productivities in each sector tagging a calibrated model indicates that sector specific taxation generates substantive welfare gains when skill transferability decreases with income as it enables the government to increase average taxes on high earners with large wage premia

political self serving bias and redistribution we explore the impact of the self serving bias on the supply and demand for redistribution we present results from an experiment in which participants decide on redistribution after performing a real effort task dependent on individual performance participants are divided into two groups successful and unsuccessful participants success is exogenously determined because they are randomly assigned to either a hard or easy task however because participants are not told which task they were assigned to there is ambiguity as to whether success or failure should be attributed to internal or external factors participants take two redistribution decisions first they choose a supply of redistribution in a situation where no personal interests are at stake second they choose a redistributive system behind a veil of ignorance our results confirm and expand previous findings on the self serving bias successful participants are more likely to attribute their success to their effort rather than luck and they opt for less redistribution unsuccessful participants tend to attribute their failure to external factors and opt for more redistribution we demonstrate that the self serving bias contributes to a polarization of the views on redistribution

are ceos really paid like bureaucrats a common view is that there is little correlation between firm performance and ceo pay using a new fifteen year panel data set of ceos in the largest publicly traded u s companies we document a strong relationship between firm performance and ceo compensation this relationship is generated almost entirely by changes in the value of ceo holdings of stock and stock options in addition we show that both the level of ceo compensation and the sensitivity of compensation to firm performance have risen dramatically since 1980 largely because of increases in stock option grants

top incomes in the long run of history a recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics top incomes represent a small share of the population but a very significant share of total income and total taxes paid hence aggregate economic growth per capita and gini inequality indexes are sensitive to excluding or including top incomes we discuss the estimation methods and issues that arise when constructing top income share series including income definition and comparability over time and across countries tax avoidance and tax evasion we provide a summary of the key empirical findings most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks top income shares do not recover in the immediate postwar decades however over the last thirty years top income shares have increased substantially in english speaking countries and in india and china but not in continental european countries or japan this increase is due in part to an unprecedented surge in top wage incomes as a result wage income comprises a larger fraction of top incomes than in the past finally we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

the fiscal implications of hurricane strikes in the caribbean abstract this paper empirically traces the fiscal impacts of hurricane strikes to this end a hurricane damage index is derived from a physical wind field model for a panel of caribbean countries over 36 years results based on panel var and impulse response functions analysis show that overall hurricane strikes exert a short term impact indeed the study finds that the response of government spending is positive and significant while public investment debt and tax revenue do not appear to respond significantly to hurricane strikes moreover the study finds that governments respond to hurricane strikes by engaging in short term deficit financing

bankers and their bonuses we analyse the role of financial sector workers in the huge rise of the share of earnings going to those at the very top of the pay distribution in the uk rising bankers bonuses accounted for two thirds of the increase in the share of the top 1 after 1999 surprisingly bankers share of earnings showed no decline between the peak of the financial boom in 2007 and 2011 three years after the global crisis began nor did bankers relative employment position deteriorate over this period we discuss proposed policy responses such as transparency bonus clawbacks numerical bonus targets and tax

the drivers of income inequality in rich countries rising income inequality has recently come centre stage as a core societal concern for rich countries the diagnosis of the forces driving inequality upwards and their relative importance remains hotly contested notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices this survey provides a critical review and synthesis of recent research the focus is on income inequality across the entire distribution rather than only on what has been happening at the very top we pay particular attention to including what has been learned from the analysis of micro data to ensuring that the coverage is not unduly us centric and to analyses of the interrelations between the different drivers of inequality the marked differences in inequality trends across countries and time periods reflect how global economic forces such as globalisation and technological change have interacted with differing national contexts and institutions major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades

what happens when you tax the rich evidence from executive compensation this paper examines the responsiveness of taxable income to changes in marginal tax rates using detailed compensation data on several thousand corporate executives from 1991 to 1995 the data confirm that the higher marginal rates of 1993 led to a significant decline in taxable income indeed this small group of executives may account for as much as 20 percent of the aggregate change in wage and salary income for approximately the one million richest taxpayers over this time period one person alone can account for more than 2 percent the decline however is almost entirely a short run shift in the timing of compensation rather than a permanent reduction in taxable income the short run elasticity of taxable income with respect to the net of tax share exceeds one in this sample but the elasticity after one year is at most 0 4 and probably closer to zero breaking out the tax responsiveness of different types of compensation shows that the large short run responses come almost entirely from a large inc

the elasticity of taxable income during the 1990s new estimates and sensitivity analyses author affiliation seth h giertz sgiertz2 unl edu acknowledgment the author wishes to thank david weiner ed harris bob dennis doug hamilton tom woodward emmanuel saez chris bollinger and three anonymous referees for their comments and assistance 1 introductioneconomists have long recognized that taxation creates economic inefficiency by distorting relative prices often between leisure and all other goods in the economy even a broad based income tax can have substantial efficiency costs so long as leisure remains untaxed harberger 1964 uses this as motivation for comparing the efficiency implications of direct versus indirect taxation in so doing he shows how labor supply elasticities can be used to measure the efficiency implications of income taxation 1 harberger s analysis had a profound influence on public and labor economists spurring increased research into labor supply elasticities which were seen as proxies for the efficiency costs from taxation more than two decades after harberger economists began to emphasize the variety of other margins over which taxes can distort behavior in addition to hours worked these economists noted that these other behavioral responses may too have important implications for efficiency an important building block in the evolution of this literature was set forth by slemrod 1990 who presented a hierarchy of behavioral responses to taxation slemrod divided behavior into three categories based on their responsiveness to taxes his least responsive category real responses includes individuals changing consumption and work patterns and businesses altering investment and production decisions second in order of responsiveness is circumvention which includes both illegally evasion and legally avoidance bypassing the tax system 2 in the case of evasion income is concealed from tax authorities or factors that offset tax liabilities such as expenses and deductions are inflated beyond what is legally permitted in the case of avoidance income is shifted in order to receive more favorable tax treatment diverting income into a tax deferred retirement account is an example of avoidance 3 included in circumvention is the expenditure of time and money necessary to avoid or evade taxation third on the hierarchy and the most responsive is the timing of income receipt which includes pulling the receipt of income into the previous year or pushing it into the next in order to take advantage of more favorable tax treatment while not altering real behavior 4 slemrod further recognizes that the type of behavioral response could have implications for both tax revenue and tax incidence and in some cases efficiency predating slemrod s insights lindsey 1987 produced elasticity estimates for taxable income although what lindsey termed taxable income more closely approximates adjusted gross income agi instead of labor supply 5 lindsey s estimated elasticities were much larger than the labor supply literature would have suggested lindsey emphasized the revenue implications of the elasticity of taxable income eti but not its efficiency implications building on slemrod and lindsey feldstein 1995 produced eti estimates but went much further than lindsey in describing the behaviors that could affect taxable income he argued that many of these behaviors were not captured by labor supply elasticities furthermore feldstein posited that income taxation creates economic inefficiency not only by distorting the relative price between labor and leisure but more broadly by distorting the relative price between goods or activities that are taxed and those that are not taxed since leisure is not the only untaxed activity for example in response to taxes not only work hours but also work effort might change

the impact of climate change on regional government expenditures evidence from russia this paper explores an almost untouched topic in the fast growing climate econometrics literature the implications of climate change for government expenditures using a rich sub national dataset for russia covering 1995 2009 we estimate the impacts of changes in climatic conditions through short term variation and medium term changes in average regional temperatures and precipitation we show a strong and robust negative but non linear relation between regional budget expenditures and population weighted temperature the results indicate that an increase in temperature results in a decrease in public expenditures and that the magnitude of this effect diminishes the warmer the region further our results suggest that the benefits from warming accumulate and that adaptation measures could help leverage those benefits the estimated decreases in regional government expenditure are however quite small in mild warming scenarios according to our estimates russia saves roughly usd 3 4 billion in regional government expenditures between 2000 and the 2020s without undertaking adaptation measures depending on the scenario it should be noted that our results are estimated for a scenario of mild temperature increase 1 2 circ c larger temperature increases are likely to have dramatic consequences e g from loss of permafrost and methane release that are impossible to predict with available historical data

the growth aftermath of natural disasters this paper provides a description of the macroeconomic aftermath of natural disasters it traces the yearly response of gross domestic product growth both aggregated and disaggregated into its agricultural and non agricultural components to four types of natural disasters droughts floods earthquakes and storms the paper uses a methodological approach based on pooling the experiences of various countries over time it consists of vector auto regressions in the presence of endogenous variables and exogenous shocks varx applied to a panel of cross country and time series data the analysis finds heterogeneous effects on a variety of dimensions first the effects of natural disasters are stronger for better or worse on developing than on rich countries second while the impact of some natural disasters can be beneficial when they are of moderate intensity severe disasters never have positive effects third not all natural disasters are alike in terms of the growth response they induce and perhaps surprisingly some can entail benefits regarding economic growth thus droughts have a negative effect on both agricultural and non agricultural growth in contrast floods tend to have a positive effect on economic growth in both major sectors earthquakes have a negative effect on agricultural growth but a positive one on non agricultural growth storms tend to have a negative effect on gross domestic product growth but the effect is short lived and small future research should concentrate on exploring the mechanisms behind these heterogeneous impacts

taxation and top incomes in canada we estimate the elasticity of reported income with respect to tax rates for high earners using sub national variation across canadian provinces we argue this allows for better identification of tax elasticities than the existing literature we find that elasticities of reported income at the provincial level are large for incomes in the top 1 but small for lower earners there are strong indications that the response happens both through earned and capital income while our estimated elasticities are large changes in tax rates cannot explain much of the overall long run trend of higher income concentration in canada resume fiscalite et revenus les plus eleves au canada les auteurs evaluent l elasticite du revenu declare par rapport aux taux d imposition pour les revenus les plus eleves en utilisant les variations intra nationales a travers les provinces du canada ils suggerent que cela produit une meilleure identification des elasticites que ce que contient la litterature pour le moment on decouvre que les elasticites du revenu declare sont elevees pour les 1 au sommet mais faibles pour les revenus plus bas il appert fortement que la reponse se produit tant pour les revenus gagnes que pour les revenus d investissement meme si les elasticites mesurees sont elevees les changements dans les taux d imposition ne peuvent pas expliquer beaucoup de la tendance a long terme vers une plus forte concentration des hauts revenus au canada

firm heterogeneity in capital labour ratios and wage inequality author s leonardi marco abstract this paper documents the increasing dispersion of capital labor ratios across firms in the us and provides some empirical evidence of a positive correlation at the two digit industry level between the dispersion of capital labor ratios across firms and residual wage inequality to explain this empirical fact the paper adopts a search model where firms differ in their optimal capital investment the exogenous decline in the relative price of equipment capital makes the distributions of capital labor ratios more dispersed in a frictional labor market this force generates wage dispersion among identical workers ols estimates of the relationship between capital dispersion and the relative price of equipment capital support the main hypothesis of the model

buchanan economics and politics author affiliation paul h rubin samuel candler dobbs professor of economics emory university department of economics 312e rich building 1602 fishburne drive atlanta ga 30322 2240 usa e mail prubin emory edu1 introductionmy work has been greatly influenced by jim buchanan much of my early work was in public choice see e g kau and rubin 1979 2002 of course this field would not exist without the calculus of consent buchanan and tullock 1962 more recently my research has gone in different directions but it still bears jim s influence i take as my text today a statement from jim buchanan s great presidential address to the southern economic association in 1963 economics is the study of the whole system of exchange relationships politics is the study of the whole system of coercive or potentially coercive relationships buchanan 1964 p 220 i agree with this statement but in this tribute i want to extend this analysis a little bit i want to point out some additional differences between thinking about economics and thinking about politics some of this analysis is based on my work on the biology of politics rubin 2002 2003 based on that work i have come to the conclusion that in some sense political thinking is more basic to our minds than is economic thinking that is when faced with an interpersonal issue that does not involve family or sex an individual untrained in economics is more likely to treat it as a political issue than as an economic issue indeed one of our tasks as economists is or should be to educate our students and the public about the distinction between economics and politics pinker 2003 not an economist argues that economics is one area where human intuitions are lacking and that it is important to teach economics for this reason 2 characteristics of political versus economic thinkinghere are some of the relevant characteristics of political thinking as contrasted with economic thinking i politics is about competition for resources while economics is about cooperation to generate surpluses ii political thinking tends to be zero sum division of a fixed pie economics allows for positive sum interactions iii politics is an us versus them conflict we are a tribal species with tribal competition economics is universal trade with anyone is beneficial iv perhaps because of its us versus them nature politics is dichotomous win or lose good or bad economics is continuous more or less how much v political processes are controlled by specific active agents the chief the king the general these agents may be heroes or villains but they are purposeful agents economics deals with processes as the market process or the invisible hand vi politics focuses on motives economics focuses on net outputs i now discuss each of these issues in turn competitionthe most important error in economic thinking is associated with one of the most fundamental concepts of economics competition as buchanan argues in his address the fundamental unit of economics is the transaction and transactions are cooperative competition is important but it is a tool to improve cooperation buchanan among others points out that in the purely competitive model there is no competition but we do not fully understand or analyze the implications even in nonperfectly competitive environments the degree of competition is overestimated firms in this environment do compete with each other but they are competing for the right to cooperate with consumers and suppliers including workers a monopolist is a firm with an exclusive ability or right to cooperate with consumers in some market we focus on competition rather than cooperation because of our political bias toward looking at markets through the lens of politics competition is between firms which are actively striving to accomplish some goal

returns to talent and the finance wage premium to study the role of talent in finance workers pay we exploit a special feature of the french higher education system wage returns to talent have been significantly higher and have risen faster since the 1980s in finance than in other sectors both wage returns to project size and the elasticity of project size to talent are also higher in this industry last the share of performance pay varies more for talent in finance these findings are supportive of finance wages reflecting the competitive assignment of talent in an industry that exhibits a high complementarity between talent and scale received october 11 2017 editorial decision september 4 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

rising earnings inequality in sweden the role of composition and prices the rise in cross sectional earnings inequality in sweden between 1990 and 2002 is decomposed into changes in market prices of observable characteristics changes in the composition of the labor force across demographic groups and industries and changes in unobservables the swedish experience is then compared with that in the united states in both countries the rise in earnings inequality is a consequence of rising upper tail dispersion contrary to the u s experience where the rise is largely driven by changing market prices of observables and increased residual dispersion shifts in the swedish labor force composition have contributed positively to the rise in the p90 p50 gap the rise in the swedish p99 p90 gap however is entirely accounted for by changes in prices and residual dispersion

relative concerns for consumption at the top an intertemporal analysis for the uk abstract this paper investigates whether the consumption of rich households provides a reference point in the intertemporal consumption choices of non rich households using uk household data on food consumption we estimate the euler equation implied by a life cycle model incorporating relative concerns for the consumption of rich households according to both our ols and gmm estimates for the population of non rich households as a whole there is no evidence of such relative concerns we also examine an alternative model of relative concerns in which households overconsume when exposed to higher reference group consumption and find correlational evidence that this may be the case for food consumed away from home finally we investigate the presence of heterogeneous relative concerns across county and household characteristics in both models finding evidence of relative concerns for consumption at the top in counties with relatively low income inequality this mechanism seems to operate for food consumed away from home

the structure of inequality and the politics of redistribution against the current consensus among comparative political economists we argue that inequality matters for redistributive politics in advanced capitalist societies but it is the structure of inequality not the level of inequality that matters our theory posits that middle income voters will be inclined to ally with low income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich we test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the dispersion of earnings in the lower half of the distribution in addition we present survey evidence on preferences for redistribution among middle income voters that is consistent with our theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew

constitutional change and inequality in scotland what scope does a sub national economy have to affect the level of inequality does a policy menu consistent with the theories of fiscal federalism provide for an ability to affect inequality measures or does this ability require the powers of a nation state in this paper we discuss these questions in the context of the debate around the scottish independence referendum in which inequality has played a prominent role and ask whether independence further devolution or simply different policies under the current constitutional framework are capable of helping scotland make the transition to a less unequal income distribution we provide a series of estimates of the impact of different policy choices upon inequality in scotland and discuss inequality reduction in the context of different constitutional options

it s the market the broad based rise in the return to top talent abstract one explanation that has been proposed for rising inequality is that technical change allows highly talented individuals or superstars to manage or perform on a larger scale applying their talent to greater pools of resources and reaching larger numbers of people thus becoming more productive and higher paid others argue that managerial power has increased in a way that allows those at the top to receive higher pay that social norms against higher pay levels have broken down or that tax policy affects the distribution of surpluses between employers and employees we offer evidence bearing on the different theories explaining the rise in inequality in the united states over recent decades first we look the increase in pay at the highest income levels across occupations we consider the income share of the top 1 percent over time and we turn to evidence on inequality of wealth at the top in looking at the wealthiest americans we find that those in the forbes 400 are less likely to have