growth and unemployment this paper analyses the effects of growth on long run unemployment using a search model of equilibrium unemployment where growth arises explicitly from the introduction of new technologies that require labour reallocation for their implementation the analysis uncovers and compares between two competing effects of growth on unemployment the first is a capitalisation effect whereby an increase in growth raises the capitalised returns from creating jobs and consequently reduces the equilibrium rate of unemployment the second is a creative destruction effect whereby an increase in growth reduces the duration of a job match thereby raising the equilibrium level of unemployment both directly by raising the job separation rate and indirectly by discouraging the creation of job vacancies this paper asks the question of how the rate of economic growth affects unemployment in the long run the main consideration that leads us to think that this is an interesting question has to do with the re allocative aspect of growth in the long run faster economic growth must come from a faster increase in knowledge to the extent that the advancement of knowledge is embodied in industrial innovations it is likely to raise the job destruction rate through automation skill obsolescence and the bankruptcy associated with the process of creative destruction in short increased growth is likely to produce an increased rate of job turnover and the search theories of lucas and prescott 1974 and pissarides 1990 imply that an increased rate of job turnover will result in a higher natural rate of unemployment this conclusion is also consistent with the empirical results of davis and haltiwanger 1990 which show that periods of high unemployment tend to be periods of high job turnover at the establishment level it suggests the possibility of a positive longrun tradeoff between growth and unemployment at least over some range there has been relatively little attention paid to our question in the literature on longrun determinants of unemployment for example the recent empirical examination by layard nickell and jackman 1991 of unemployment rates among oecd countries did not even consider the rate of economic growth as a possible explanatory variable this is consistent with the seminal theoretical work of phelps 1968 which implies that the natural rate of unemployment is independent of the rate of productivity growth the only

unemployment growth and taxation in industrial countries unemployeement and taxes do taxes affect the rate of umemployeement to the layman the upward trend in european unemployment is related to the slowdown of economic growth we argue that the layman s view is correct the increase in european unemployment and the slowdown in economic growth are related because they stem from a common cause an excessively rapid growth in the cost of labour in europe labour costs have gone up for many reasons but one is particularly easy to identify higher taxes on labour if wages are set by strong and decentralized trade unions an increase in labour taxes is shifted onto higher real wages this has two effects first it reduces labour demand and thus creates unemployment secondly as firms substitute capital for labour the marginal product of capital falls over long periods of time this in turn diminishes the incentive to invest and to grow the data strongly support this view according to our estimates the observed rise of 14 percentage points in labour tax rates between 1965 and 1995 in the eu could account for a rise in eu unemployment of roughly 4 percentage points a reduction of the investment share of output of about 3 percentage points and a growth slowdown of about 0 4 percentage points a year francesco daveri and guido tabellini

public private political cleavage what happens after retirement political preferences of public employees differ from those of workers in the private sector the former are more likely to vote for left wing parties and orient themselves ideologically towards the left this political cleavage can be understood as the result of occupational incentives or alternatively as ideological self selection whereby individuals favoring government solutions seek employment in the public sector we test the selection hypothesis by estimating the effects of public versus private occupational sector on political preferences before and after retirement the data are from the norwegian election surveys and cover nine national elections between 1977 and 2009 the research design addresses a series of cross sectional data and the key challenge of endogenous retirement is handled with instrumental variables party choice ideological orientation and public spending preferences are shown to change following retirement and former private and public employees converge the results reject selection based on hard wired political preferences

the hidden persuaders institutions and individuals in economic theory in his classic book the hidden persuaders vance packard claimed that large corporations manipulated consumers using advertising techniques john kenneth galbraith and others have repeated a similar view against this gary becker and george stigler have claimed that advertising is essentially informative rather than manipulative in contrast it is argued here that both of these opposed accounts of human agency neglect the more subtle and undesigned processes by which institutions bear upon and mould individuals this paper proposes a concept of reconstitutive downward causation in which institutions act upon individual habits and dispositions the mechanisms involved do not fall foul of past critiques of holism or methodological collectivism this argument involves a rehabilitation of the concept of habit in social science with far reaching implications

household debt overhang and unemployment we use a labor search model to explain why the worst employment slumps often follow expansions of household debt we find that households protected by limited liability suffer from a household debt overhang problem that leads them to require high wages to work firms respond by posting high wages but few vacancies this vacancy posting effect implies that high household debt leads to high unemployment even though households borrow from banks via bilaterally optimal contracts the equilibrium level of household debt is inefficiently high due to a household debt externality we analyze the role that a financial regulator can play in mitigating this externality

wealth taxation and wealth accumulation theory and evidence from denmark using administrative wealth records from denmark we study the effects of wealth taxes on wealth accumulation denmark used to impose one of the world s highest marginal tax rates on wealth but this tax was greatly reduced starting in 1989 and later abolished due to the specific design of the wealth tax the 1989 reform provides a compelling quasi experiment for understanding behavioral responses among the wealthiest segments of the population we find clear reduced form effects of wealth taxes in the short and medium run with larger effects on the very wealthy than on the moderately wealthy we develop a simple life cycle model with utility of residual wealth bequests allowing us to interpret the evidence in terms of structural primitives we calibrate the model to the quasi experimental moments and simulate the model forward to estimate the long run effect of wealth taxes on wealth accumulation our simulations show that the long run elasticity of taxable wealth with respect to the net of tax return is sizable at the top of the distribution

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

schumpeter and venture finance radical theorist broke investor and enigmatic teacher schumpeter s relation to venture finance constitutes a fascinating yet so far unacknowledged chapter of his biography and financial history presenting new historical evidence and pointing out connections that have so far escaped attention we first discuss schumpeter s venture theory of money and banking then his personal history as a broke investor in vienna and finally his influence on the emerging venture industry during his later years at harvard we show how the theoretical vision inspired his own failed effort as a venture investor in the 1920s and provided a powerful intellectual frame for the later development of venture finance in the 1940s

capital is back wealth income ratios in rich countries 1700 2010 how do aggregate wealth to income ratios evolve in the long run and why we address this question using 1970 2010 national balance sheets recently compiled in the top eight developed economies for the united states united kingdom germany and france we are able to extend our analysis as far back as 1700 we find in every country a gradual rise of wealth income ratios in recent decades from about 200 300 in 1970 to 400 600 in 2010 in effect today s ratios appear to be returning to the high values observed in europe in the eighteenth and nineteenth centuries 600 700 this can be explained by a long run asset price recovery itself driven by changes in capital policies since the world wars and by the slowdown of productivity and population growth in line with the s g harrod domar solow formula that is for a given net saving

taxing across borders tracking personal wealth and corporate profits globalization is making it increasingly easy for corporations to shift profits to low tax countries modern technology has also made it simpler for wealthy individuals to move funds to undeclared bank accounts in offshore tax havens both issues have featured prominently in the news and global economic debates since the financial crisis but the arguments tend to be based on relatively little empirical evidence measuring the costs of tax havens to foreign governments is fraught with difficulties however balance of payments data and corporate filings show that us companies are shifting profits to bermuda luxembourg and similar countries on a large and growing scale about 20 percent of all us corporate profits are now booked in such havens a tenfold increase since the 1980s this profit shifting is typically done within the letter of the law and thus would be best described as tax avoidance rather than fraud i attempt to quantify its cost for government coffers by taking a fresh look at the most recent macroeconomic evidence and combining it in a systematic manner over the last 15 years the effective corporate tax rate of us companies has declined from 30 to 20 percent and about two thirds of this decline can be attributed to increased profit shifting to low tax jurisdictions wealthy individuals too use tax havens sometimes legally to benefit from banking services not available in their home country and sometimes illegally to evade taxes a number of changes have sought with some success to curb that form of tax evasion over the last years yet the available evidence from switzerland and

agency growth salaries and the protected bureaucrat agency growth salaries and the protected bureaucrat i introduction in recent years increased attention has been directed towards understanding bureaucratic behavior and its implications for economic performance a key element of this literature is the application of utility maximization for deriving implications about bureaucratic behavior representative is niskanen 1971 38 who argues that bureaucratic decisions are made rationally to maximize utility which is assumed to be a function of salary perquisites reputation power patronage and output implicit in the literature is an activist bureaucracy which engages in purposeful action to advance its interests an important part of some of the bureaucracy literature is the notion that government employees are a source of the documented growth of government it is commonly asserted that government employees acting in their own self interest will foster the growth of their organization growth of the organization is seen as a means for increasing salaries as well as the other arguments in the utility function the positive link between salaries and growth is emphasized by downs 1967 11 in his classic study of bureaucracy any organization experiencing rapid overall growth provides many more opportunities for promotion in any given time period than a static one additional references to the importance of agency growth for salaries include niskanen 1971 38 41 1975 619 tullock 1974 127 and heclo 1977 131 building on that theme other researchers such as bush and denzau 1977 borcherding bush and spann 1977 and bennett and orzechowski 1983 have argued that government employees will use their power to influence election outcomes to promote government growth and hence salaries despite the often critical nature of the salary growth relationship in recent discussions of bureaucratic behavior and the growth of government there is no direct empirical evidence of the asserted linkage related evidence provided for example by wolfinger and rosenstone 1980 97 101 that government employees have higher voter participation rates than do private employees is not conclusive support for the growth salary assertion voting results alone do not permit one to distinguish the underlying reasons for the higher participation rates and there are many more importantly for the federal government at least the assertion that salaries of government employees are significantly affected by agency growth seems inconsistent with the idea that the civil service system shields federal white collar employees from the uncertain fluctuations of political outcomes skepticism about the growth salary linkage due to the constraints of the civil service system is noted by wilson 1980 375 few officials need fear for their jobs and their salaries are determined by government wide laws and regulations rather than by the size rate of growth or success of the organization further while senior agency officials would be in the best positions to promote the growth of their agencies within the federal government the salaries of high gs general schedule level and senior executive service personnel are capped by law and may not exceed those paid to officials in executive level v the restriction limits the salaries of senior managers regardless of the growth of the agency one could however argue that managers promote growth to motivate their subordinates or that medium and lower level employees are the primary proponents of agency growth but as kaufman 1981 79 notes most officers and employees once they have attained career status could do nearly as well materially without pushing themselves as they could by working at capacity the absence of incentives and resulting inertia can contribute to the often cited tension between career bureaucrats and political appointees the above discussion points out a serious problem with the growth salary linkage often asserted in the bureaucracy literature

the missing wealth of nations are europe and the u s net debtors or net creditors this paper shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens drawing on systematic anomalies in portfolio investment positions and a unique swiss dataset i find that 8 of the global financial wealth of households is held in tax havens 6 of which goes unrecorded on the basis of plausible assumptions accounting for unrecorded assets turns the eurozone officially the world s second largest net debtor into a net creditor it also reduces the u s net debt significantly the results shed new light on global imbalances and challenge the widespread view that after a decade of poor to rich capital flows external assets are now in poor countries and debts in rich countries i provide concrete proposals to improve international investment statistics

what happens during recessions crunches and busts we provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 oecd countries over the period 1960 2007 in particular we analyse the implications of 122 recessions 113 28 credit contraction crunch episodes 114 28 episodes of house price declines busts 245 61 episodes of equity price declines busts and their various overlaps in these countries over the sample period our results indicate that the interactions between macroeconomic and financial variables can play a major role in determining the severity and duration of a recession specifically we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions stijn claessens m ayhan kose and marco e terrones

public sector unions and public spending this study examines the influence of public sector unions on the expansion of the public sector based on public goods theory our paper models how unions influence the supply of and demand for public sector activities on the demand side public sector unions are special interests which advocate public sector expansion to policy makers on the supply side they exert pressure to maintain and expand monopoly powers empirical evidence supports the hypothesis that a positive relationship exists between public sector unionism and public spending

the effects of extended unemployment insurance over the business cycle evidence from regression discontinuity estimates over 20 years one goal of extending the duration of unemployment insurance ui in recessions is to increase ui coverage in the face of longer unemployment spells although it is a common concern that such extensions may themselves raise nonemployment durations it is not known how recessions would affect the magnitude of this moral hazard to obtain causal estimates of the differential effects of ui in booms and recessions this article exploits the fact that in germany potential ui benefit duration is a function of exact age which is itself invariant over the business cycle we implement a regression discontinuity design separately for 20 years and correlate our estimates with measures of the business cycle we find that the nonemployment effects of a month of additional ui benefits are at best somewhat declining in recessions yet the ui exhaustion rate and therefore the additional coverage provided by ui extensions rises substantially during a downturn the ratio of these two effects represents the nonemployment response of workers weighted by the probability of being affected by ui extensions hence our results imply that the effective moral hazard effect of ui extensions is significantly lower in recessions than in booms using a model of job search with liquidity constraints we also find that in the absence of market wide effects the net social benefits from ui extensions can be expressed either directly in terms of the exhaustion rate and the nonemployment effect of ui durations or as a declining function of our measure of effective moral hazard copyright 2012 oxford university press

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

bequest and tax planning evidence from estate tax returns i study bequest and wealth accumulation behavior of the wealthy subject to the estate tax shortly before death the onset of a terminal illness leads to a very significant reduction in the value of estates reported on tax returns fifteen to twenty percent with illness lasting months to years and about five to ten percent in the case of illness reported as lasting days to weeks i provide evidence suggesting that these findings cannot be explained by real shocks to net worth such as medical expenses or lost income but instead reflect deathbed estate planning the results suggest that wealthy individuals actively care about disposition of their estates but that this preference is dominated by the desire to hold on to their wealth while alive

do americans want to tax wealth evidence from online surveys abstract a vast theoretical literature in public finance has studied the desirability of capital taxation this discussion largely ignores the political feasibility of taxing wealth we provide to our knowledge the first investigation of individuals preferences over jointly taxing income and wealth we provide subjects with a set of hypothetical individuals incomes and wealth and elicit subjects preferred absolute tax bill for each individual our method allows us to unobtrusively map both income earned and accumulated wealth into desired tax levels our regression results yield roughly linear desired tax rates on income of about 14 respondents suggested tax rates indicate positive desired wealth taxation when we distinguish between sources of wealth we find that in line with recent theoretical arguments subjects implied tax rate on wealth is 3 when the source of wealth is inheritance far higher than the 0 8 rate when wealth is from savings textual analysis of respondents justifications for their tax rates imply limited concern for the elasticity of tax bases with respect to net of tax rates

how important is the credit channel an empirical study of the us banking crisis we examine whether by adding a credit channel to the standard new keynesian model we can account better for the behaviour of us macroeconomic data up to and including the banking crisis we use the method of indirect inference which evaluates statistically how far a model s simulated behaviour mimics the behaviour of the data we find that the model with credit dominates the standard model by a substantial margin credit shocks are the main contributor to the variation in the output gap during the crisis

wages and employment in public sector unions i introduction standard economic theory states that a union which raises wages above the competitive level will reduce employment empirical evidence reviewed by lewis 1986 indeed shows that unions raise wages and that unionized establishments in the private sector show slower employment growth than comparable nonunionized establishments 1 studies in the public sector also find that unions raise wages see freeman 1986 and lewis 1988 for reviews but by less than in the private sector unionization in the public sector however often increases employment 2 in a study of 5 144 city and county governments zax 1989 finds that unionized departments increase employment by 3 1 over nonunionized departments we propose an explanation that exploits a key difference between public and private sector employers the quantity of public services provided is determined by a political process in which union members and their supporters have a voice this voice is important when shifts from a decisive voter with a lower income to one with a higher income increase the expressed demand for public services this increase implies the possibility that wages for public sector workers can increase when employment increases this possibility becomes more likely the greater is the difference in income between the previous and current decisive voter public sector workers would therefore use their electoral influence to ensure that the decisive voter is one with as high an income as possible in other words workers in the public sector gain leverage from the elasticity of demand for public sector services with respect to changes in income associated with changes of the identity of the decisive voter most importantly we show that higher employment may result even when union supporters are a small minority of the electorate though this political consideration has been suggested by others including freeman 1986 zax 1989 and zax and ichniowski 1988 it has not been explicitly modeled or explored the essential idea is expressed in the following newspaper story the port authority pat drivers union is working against county commission candidate dan fleck because he has urged pat to appeal a court ruling that ordered discontinuation of a monroeville minibus service run by a private company larry klos president of local 85 of the amalgamated transit union said yesterday we have 2 700 members and they all have relatives and friends we will target mr fleck meaning union members will vote against the thornburg republican pittsburgh post gazette 26 september 1991 p 5 not surprisingly mr fleck lost the election our analysis rests on an important debate begun by dunlop 1944 and ross 1948 concerning union objectives which asks whether unions maximize a well defined objective function such as the wage bill the union s objective has been modeled as reflecting the preferences of the median voter in the union 3 for example suppose workers care only about wages and their own employment that jobs are allocated to the most senior workers and that wage employment bargains must lie on the labor demand curve the union as farber 1986 shows would then set the wage so that the median worker is just retained such a wage policy however would make the union shrink over time researchers extended this median worker model to consider workers with foresight or uncertainty about labor demand and find that union employment shrinks less than suggested by static models or that it need not shrink at all 4 these models however cannot explain the empirical finding that public sector unionization is associated with increased employment an explanation for how unions raise both wages and employment is offered by the efficient bargains or contract curve model which supposes that unions care about both wages and employment and that unions bargain with management over both issues

public sector unions and municipal employment using 1980 data for a large sample of u s cities the author reexamines recent empirical findings of a positive association between public sector unionization and municipal employment several researchers have interpreted this correlation as evidence that public employee unions successfully exert political pressure to raise the demand for municipal services structural estimates of labor demand and the determinants of police and fire unionization reveal however that economies of scale in union formation are at least partly responsible for any positive association between public sector unionization and municipal employment the author concludes that previous studies overstate the amount of political clout wielded by municipal labor unions

facts and challenges from the great recession for forecasting and macroeconomic modeling this paper provides a survey of business cycle facts updated to take account of recent data emphasis is given to the great recession which was unlike most other postwar recessions in the united states in being driven by deleveraging and financial market factors we document how recessions with financial market origins are different from those driven by supply or monetary policy shocks this helps explain why economic models and predictors that work well at some times do poorly at other times we discuss challenges for forecasters and empirical researchers in light of the updated business cycle facts

general revenue sharing and public sector unions abstract in this paper i find that in the context of a large intergovernmental general revenue sharing program implemented from 1972 to 1986 cities increased expenditures one for one with federal grants which is suggestive of a large flypaper effect furthermore i find that cities in states with pro union collective bargaining laws spent more than half of the transfers on increased wages while cities in states without such laws spent a greater fraction on increased government services these latter findings suggest that public sector unions play an important role in determining the usage and impact of intergovernmental grants

what do we know about evolution of top wealth shares in the united states in piketty s 2014 prominent book capital in the twenty first century he argues that the concentration of wealth may become increasingly extreme in the future as piketty reminds us the group of rentiers people living off accumulated capital has been historically large and politically and socially influential because so much of large fortunes end up being inherited the current concentration of wealth is bound to predict at least weakly and perhaps strongly how important rentiers will be regardless of whether one buys into depictions such as the rentier enemy of democracy p 422 the extent to which the well off are going to rely on work versus rely on the returns to their wealth in the future is clearly important for assessing the extent to which a society will view itself as in some way a meritocracy given that the us economy has experienced rising inequality in its income and earning distributions for example piketty and saez 2003 or see the symposium on the top 1 percent in the summer 2013 issue of this journal one would expect that the distribution of wealth would follow a similar path however available evidence on this topic is much more scant and conflicting than that on income and earnings in fact when piketty 2014 reports direct estimates of wealth concentration for france the united kingdom sweden and the united states in chapter 10 of his book he finds as yet little evidence of dramatic increase in wealth concentration in any of these countries

credit market imperfections and persistent unemployment abstract this paper develops the thesis that credit market frictions may be an important contributor to high unemployment in europe when a change in the technological regime necessitates the creation of new firms this can happen relatively rapidly in the u s where credit markets function efficiently in contrast in europe job creation is constrained by credit market imperfections so unemployment rises and remains high for an extended period the data show that there has not been slower growth in the most credit dependent industries in europe relative to the u s but the share of employment in these industries is lower than in the u s this suggests that although credit market imperfections are unlikely to have been the major cause of the increase in european unemployment they may have played some role in limiting european employment growth

the macroeconomics of labor and credit market imperfections labour market frictions are not the only possible source of high unemployment credit market imperfections driven by microeconomic frictions and influenced by macroeconomic factors could also be to blame to develop this idea in a simple and tractable macroeconomic model we treat credit and labour market imperfections in a symmetrical way accordingly we introduce specificity in credit relationships and assume that credit to potential entrepreneurs is rationed due to endogenous search frictions in the spirit of diamond 1990 these imperfections mirror job search frictions in the labour market we study the determination of equilibrium unemployment in the presence of credit market frictions both with exogenous and endogenous wages we explore a number of possible extensions endogenous destruction monetary policy and the short run effects of financial liberalization

the effects of multiple objectives in the theory of public sector supply this paper incorporates objectives of both legislators and bureaucrats in a model of public sector decisionmaking existing models assume that either bureaucrats control production information and decisions niskanen type models or legislators control production decisions legislative models my model explicitly incorporates imperfect agent behavior and corresponding preferences of both legislators and bureaucrats to reflect the bilateral nature of appropriations the analysis shows that output levels generally differ from politically and socially efficient levels and depend on the relative weights of legislative and bureaucratic interests accordingly niskanen type and legislative models are viewed as special cases of this more general approach

unemployment questions and some answers in more or less every country in the oecd unemployment was lower in the decades following the second world war than in any other period of comparable length either before or since for example in britain unemployment has exceeded 5 in every peacetime decade from 1850 onwards except for the 1950s and 1960s alternatively as we can see in table 1 p 779 average unemployment in the 1980s and 90s is higher generally much higher than in the 1960s in every country considered why this is so is one of the questions which underlies this paper a second question which is also illustrated in the unemployment numbers presented in table 1 p 779 concerns the causes of the enormous variation in unemployment rates across the oecd countries as we shall see these are difficult questions the first in particular is one for which we do not have a complete answer by this i do not mean that we do not have theories which are broadly consistent with these numbers in fact we have theories consistent with more or less any numbers what we lack is a satisfactory empirical explanation of the time series pattern of oecd unemployment in what follows we remain focused on these two questions first considering the theoretical background and then looking at some possible answers we finish with some speculative conjectures on the first question

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

municipal residency laws and local public budgets prior research has shown that residency laws increase the productivity of municipal employees which tends to reduce per unit operating cost however this gain in efficiency appears to have been lost when one considers that public employee groups tend to be high demanders who have a greater tendency to vote in local elections and to support expenditure increases bennett and orzechowski 1983 our results tend to provide additional evidence to support the findings of previous studies that public employee groups tend to exert a disproportionate impact on local budgetary decisions

the employment effects of credit market disruptions firm level evidence from the 2008 9 financial crisis this article investigates the effect of bank lending frictions on employment outcomes i construct a new data set that combines information on banking relationships and employment at 2 000 nonfinancial firms during the 2008 9 crisis the article first verifies empirically the importance of banking relationships which imply a cost to borrowers who switch lenders i then use the dispersion in lender health following the lehman crisis as a source of exogenous variation in the availability of credit to borrowers i find that credit matters firms that had precrisis relationships with less healthy lenders had a lower likelihood of obtaining a loan following the lehman bankruptcy paid a higher interest rate if they did borrow and reduced employment by more compared to precrisis clients of healthier lenders consistent with frictions deriving from asymmetric information the effects vary by firm type lender health has an economically and statistically significant effect on employment at small and medium firms but the data cannot reject the hypothesis of no effect at the largest or most transparent firms abstracting from general equilibrium effects i find that the withdrawal of credit accounts for between one third and one half of the employment decline at small and medium firms in the sample in the year

the impact of unions on municipal elections and urban fiscal policies abstract the efficient decentralized provision of public goods requires that special interest groups such as municipal unions do not exercise undue influence on the outcome of municipal elections and local fiscal policies we develop a new political economy model in which a union can endorse one of the candidates in a local election a politician that prefers an inefficiently large public sector can therefore win an election if the union can provide sufficiently strong support during the campaign we have assembled a unique data set that is based on union endorsements that are published in leading local newspapers our empirical analysis focuses on municipal elections in the 150 largest cities in the u s between 1990 and 2012 we find that challengers strongly benefit from endorsements in competitive elections challengers that receive union endorsements and successfully defeat an incumbent also tend to adopt more union friendly fiscal policies

liquidity constraints and imperfect information in subprime lending ditions for precisely the population that is most likely to have a difficult time obtaining credit those with low incomes and poor credit histories these consumers who typically cannot qualify for regular bank loans comprise the so called subprime market because the company we study originates subprime loans its loan applications and transaction records provide an unusual win dow into the consumption and borrowing behavior of households that are rationed in primary credit markets moreover we track loan repayments allowing us to analyze the difficulties in lending to the subprime population we begin by documenting the importance of short term liquidity constraints for individuals in our sample we present two pieces of evidence both are based on purchasing behavior and indicate a high sensitivity to cash on hand first we document a dramatic degree of demand seasonality associated with tax rebates overall demand is almost 50 percent higher during tax rebate season than during other parts of the year this seasonal effect varies with household

the voting behavior of bureaucrats some empirical evidence this paper has examined the voting behavior of bureaucrats and the consequences for elections the economic theory of the rational voter predicts that bureaucrats would have more to gain by voting than the general public the cost of voting is lower for public employees than for those who work in the private sector as a consequence theory predicts that bureaucrats would participate in elections at a greater rate than other individuals as a test of the validity of the economic theory of voting an empirical analysis of national elections from 1964 to 1978 was presented the evidence is drawn from household survey data published by the u s bureau of the census the data permit a direct observation of voting participation rates of public and private employees the empirical results indicate that bureaucrats consistently participate in elections at significantly greater rates than non bureaucrats as the public sector expands and voter participation rates remain low bureaucrats will exert disproportionate influence on election outcomes

women wealth and mobility using estate tax returns data we observe that the share of women among the very wealthy in the united states peaked in the late 1960s at nearly one half and then declined to one third we argue that this pattern reflects changes in the importance of dynastic wealth with the share of women proxying for inher ited wealth if so wealth mobility decreased until the 1970s and rose thereafter such an interpretation is consistent with technological change driving long term trends in mobility and inequality as well as the recent divergence between top wealth and top income shares documented elsewhere jel d31 j16 j62 033 the extent of and changes in intergenerational mobility of wealth are central to understanding dynamics of wealth inequality but are hard to measure in this paper we argue that the share of women among the wealthiest americans can be used as a proxy for the importance of inherited rela tive to self made wealth this approach assumes that women tend to inherit rather than make great fortunes if so a higher share of women among the wealthy would reflect a rise in inherited wealth at the top and thus lower wealth mobility conversely higher wealth mobility where self made wealth replaces inherited wealth would result in more men at the top of the wealth distribution judged by this proxy and corroborated by various data sources wealth mobility decreased in the period 1925 1969 and increased thereafter such a pattern is consistent with an important role for technological change in shaping the wealth distribution and can provide an explanation for why wealth concentra tion has remained stable despite increasing income concentration in the last three decades over the past century the share of women among the very wealthy followed an inverse u pattern peaking in the late 1960s according to estate tax returns in 1925 one quarter of the wealthiest 0 01 percent were women this fraction rose rapidly through world war ii wwii and then more slowly to peak in 1969 when women neared parity with men since then the decline has been marked by 2000 women s share had fallen to one third its prewar level while the rise was evident among all wealth groups in the top 1 percent of the wealth distribution the decline was confined to the very top figure ia graphs the share of women for four different groups in the top 1 percent among decedents by year figure ib does the same for the living population with the help of estate multipliers a method that treats death as a random sampling device and uses mortality rates by age and gender to infer the distribution of wealth among the living as described in the data appendix while the rise in the share of women among the wealthy until the 1960s could reflect improve ments in women s economic status labor market gains work against the recent decline for instance since the 1970s the share of women among top earners top 0 1 percent has risen by

how progressive is the u s federal tax system a historical and international perspective this paper provides estimates of federal tax rates by income groups in the united states since 1960 with special emphasis on very top income groups we include individual and corporate income taxes payroll taxes and estate and gift taxes the progressivity of the u s federal tax system at the top of the income distribution has declined dramatically since the 1960s this dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labor income the sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity international comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity both for time trends and for cross country comparisons the pattern for the united kingdom is similar to the u s pattern france had less progressive taxes than the united states or the united kingdom in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the united states or the united kingdom

investigating the impact of auto loans on unemployment the us experience this paper explores the impact of automobile loan debt on us unemployment individuals with heterogeneous economic positions deem automobiles as important durable goods for unemployment exit and ex

competitiveness and industrial policy from rationalities of failure towards the ability to evolve this article elaborates a dynamic rationale of industrial policy focusing on how to strengthen the socio economic system s ability to evolve i e how to achieve high real income together with qualitative change it highlights that the ubiquitous rationalities of failure be it of markets governments or systems are rooted in a peculiar habit of accepting hypothetical perfect states as normative benchmarks in contrast a dynamic logic of intervention should start from the question what the system aims to accomplish combining the structuralist ontology of micro meso and macro with the functional principles of evolutionary change the paper proposes a general typology of economic policies based on their respective contributions to the system s ability to evolve

as certain as debt and taxes estimating the tax sensitivity of leverage from state tax changes abstract using staggered corporate income tax changes across u s states we show that taxes have a first order effect on capital structure firms increase leverage by around 40 basis points for every percentage point tax increase consistent with dynamic tradeoff theory the effect is asymmetric leverage does not respond to tax cuts this is true even within firm tax increases that are later reversed nonetheless lead to permanent leverage increases the treatment effects are heterogeneous and confirm the tax channel tax sensitivity is greater among profitable and investment grade firms which respectively have a greater marginal tax benefit and lower marginal cost of issuing debt

does innovation cause stock market runups evidence from the great crash this article examines the stock market s changing valuation of corporate patentable assets between 1910 and 1939 it shows that the value of knowl edge capital increased significantly during the 1920s compared to the 1910s as investors responded to the quality of technological inventions innovation was an important driver of the late 1920s stock market runup and the great crash did not reflect a significant revaluation of knowledge capital relative to physical capital although substantial quantities of influential patents were accumulated during the post crash recovery high technology firms did not earn significant excess returns over low technology firms for most of the 1930s

distributional national accounts methods and estimates for the united states this article combines tax survey and national accounts data to estimate the distribution of national income in the united states since 1913 our distributional national accounts capture 100 of national income allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth we estimate the distribution of both pretax and posttax income making it possible to provide a comprehensive view of how government redistribution affects inequality average pretax real national income per adult has increased 60 from 1980 to 2014 but we find that it has stagnated for the bottom 50 of the distribution at about 16 000 a year the pretax income of the middle class adults between the median and the 90th percentile has grown 40 since 1980 faster than what tax and survey data suggest due in particular to the rise of tax exempt fringe benefits income has boomed at the top the upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000 the government has offset only a small fraction of the increase in inequality the reduction of the gender gap in earnings has mitigated the increase in inequality among adults but the share of women falls steeply as one moves up the labor income distribution and is only 11 in the top 0 1 in 2014

wealth inequality in the united states since 1913 evidence from capitalized income tax data this paper combines income tax returns with flow of funds data to estimate the distribution of household wealth in the united states since 1913 we estimate wealth by capitalizing the incomes reported by individual taxpayers accounting for assets that do not generate taxable income we successfully test our capitalization method in three micro datasets where we can observe both income and wealth the survey of consumer finance linked estate and income tax returns and foundations tax records wealth concentration has followed a u shaped evolution over the last 100 years it was high in the beginning of the twentieth century fell from 1929 to 1978 and has continuously increased since then the rise of wealth inequality is almost entirely due to the rise of the top 0 1 wealth share from 7 in 1979 to 22 in 2012 a level almost as high as in 1929 the bottom 90 wealth share rst increased up to the mid 1980s and then steadily declined the increase in wealth concentration is due to the surge of top incomes combined with an increase in saving rate inequality top wealth holders are younger today than in the 1960s and earn a higher fraction of total labor income in the economy we explain how our ndings can be reconciled with survey of consumer finances and estate tax data

are government employees more likely to vote an analysis of turnout in the 1996 u s national election in this paper we develop and test a model of voter turnoutthat permits us to differentiate turnout rates for governmentemployees and other citizens controlling for the effects of awide range of other variables relating to turnout using 1996anes data we find that there is a significant difference inturnout rates for bureaucrats and nonbureaucrats both insimple bivariate analyses and in a full multivariate model the magnitude and significance of the coefficient forgovernment employment even in the face of controls suggeststhere is something about government employment per sethat has an effect on turnout

top wealth shares in the uk over more than a century abstract recent research highlighted controversy about the evolution of concentration of personal wealth in this paper we provide new evidence about the long run evolution of top wealth shares for the united kingdom the new series covers a long period from 1895 to the present and has a different point of departure from the previous literature we start with the analysis of the distribution of estates left at death we find that the application to the estate data of mortality multipliers to yield estimates of wealth among the living does not substantially change the degree of concentration over much of the period both in the uk and us allowing inferences to be made for years when this method cannot be applied the results show that wealth concentration in the uk remained relatively constant during the first wave of globalization but then decreased dramatically in the period from 1914 to 1979 the uk went from being more unequal in terms of wealth than the us to being less unequal however the decline in uk wealth concentration came to an end around 1980 and since then there is evidence of an increase in top shares notably in the distribution of wealth excluding housing in recent years we investigate the triangulating evidence provided by data on capital income concentration and on reported super fortunes

public sector employee voter participation and salaries the hypothesis advanced by downs 1957 that rational utility maximizing citizens would calculate the benefits and costs of voting in deciding whether to vote often has been employed to argue that voter participation rates among government employees should exceed that of comparable private sector individuals the basic rationale for that prediction was laid out by downs 1957 254 who argued that those who stand the most to gain are the men who earn their incomes there higher voter participation rates for government employees coupled with an implied preference for the expansion of the public sector has also played a role in efforts to explain the growth of government borcherding bush and spann 1977 and bush and denzau 1977 in addition to benefiting from the supply of public goods and services as do all voters government employees are seen as benefiting from the expansion of government through an increase in their salaries in this paper the issue of voter participation rates for government employees is reexamined current population survey cps data tapes containing information on individual voter behavior for the 1984 and 1986 national elections are used to estimate a qualitative choice model 1 consistent with previous findings the results presented indicate that government employees as a group are more likely to vote than are private sector workers with similar socioeconomic and demographic characteristics wolfinger and rosenstone 1980 unlike previous studies however we distinguish between federal and state and local employees this distinction is important building on the downsian hypothesis that the cost and benefits of voting matter the arguments offered in the following section lead to the prediction that the probability of voting should be lower for federal employees than for state and local the empirical

voter participation and the redistributive state the redistributive theory of the state implies that voter participation rates should be highest among those who have the most to gain or lose or a v shaped relationship between income and voting participation should exist we use a data set that contains nearly 21 000 observations on individual survey responses about voting behavior in the u s between 1972 and 1993 to show that the participation rate generally rises monotonically with income perhaps except at very high income levels it does report other findings consistent with an economic theory of voting based on returns to association and with the hypothesis that public employees vote more