“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“A full-throated defense of economic dynamism.” - The Wall Street Journal
AI Summary.The authors find no statistically significant evidence that $190bn in federal emergency K-12 school aid mitigated pandemic learning loss or raised district spending. Districts qualifying for additional funds saw local revenues fall by $907 per pupil over three years, about 8% of pre-pandemic average, roughly 80% from property taxes.
Jeffrey Clemens, Philip Hoxie and Stan VeugerNational Bureau of Economic Research
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Exploiting a discontinuity in K-12 public school districts’ qualification for Covid emergency funding (ESSR), Clemens et al find that the funds did not mitigate learning loss. To a large extent, local districts used them to lower property taxes.
Do federal emergency education grants reduce student learning loss?
Core argument: Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.
Emergency funding for K-12 public schools was an important component of recession spending packages during COVID, involving $190 billion in additional expenditure. We see no evidence that ESSER funds helped to mitigate learning loss, at least in the short run. We find no statistically significant evidence that districts increased expenditures in SY 2021 or SY 2022. We do find evidence that districts that qualified for additional ESSER funds had statistically significant reductions in local revenues that were in excess of their ESSER funds. This pass-through of federal funds may partially explain why ESSER had minimal impacts on learning loss for districts around the 5% poverty threshold. Our estimates suggest that over the three years, crossing the qualification cutoff for additional ESSER funds is associated with a $907 per pupil decrease in local revenues, or about 8% of the pre-COVID average. We show the decline in local revenues as an event study in Figure 3, which includes a flat pre-COVID trend in local revenues per pupil across the qualification threshold. In Table 5,Column 5 [], we can see that about 80% of the revenue decline came from decreases in revenues from property taxes, [which fell] by $718 per pupil across the 3 years. The findings apply specifically to districts in the neighborhood of the 5% poverty threshold for qualifying for additional ESSER funds.
Takeaways by Macro Roundup® AI
Districts crossing the 5% poverty cutoff for additional ESSER funds saw local revenues fall an estimated $907 per pupil over three years, about 8% of the pre-COVID average.
About 80% of that local revenue decline came from property taxes, which fell by $718 per pupil across the three years.
The authors find no evidence that ESSER emergency K-12 funding, totaling $190 billion, mitigated learning loss in the short run, and no statistically significant increase in district expenditures in SY 2021 or SY 2022.
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Aid for Incumbents: The Electoral Consequences of COVID-19 Relief— Using congressional representation as an instrument — an extra senator or representative per million residents predicts roughly $1,000 more aid per capita — the authors estimate that federal pandemic relief strongly predicts incumbent performance in state-wide elections.
What Do States Do with Fiscal Windfalls? Evidence from the Pandemic— The authors estimate that for every $1,000 per capita of federal pandemic aid committed to state and local governments, state revenues and expenditures each rose by roughly the same amount, with $379 going to general government spending and $72 to pension contributions. They find no statistically significant increases in healthcare, education, or infrastructure spending.
AI Summary.Modeling U.S. venture-backed startups, the authors estimate that taxing capital gains as they accrue rather than at sale would cut founders' average ownership at exit by about 25% while raising the share of entrepreneurs with positive payoffs from roughly 16% to nearly 47%. Less risk-averse founders prefer taxation at sale.
Eduardo Azevedo, Florian Scheuer, Kent Smetters and Min YangNational Bureau of Economic Research
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~84% of venture backed founders end with zero exit value, while the top 2% capture ~80% of total exit value. Accrual-based taxation would reduce mean founder ownership stakes at exit by ~25%, but with fully refundable tax credits, raise the share of founders with >0 payoffs to ~47%.
How does taxing unrealized capital gains affect startup founders?
Core argument: The authors estimate that average founder shares at exit fall about 25% under accrual-based capital gains taxation relative to realization-based taxation, as advance taxation forces additional share sales before exit.
This paper examines how taxing unrealized capital gains affects entrepreneurship, combining a dynamic career-choice model with new evidence on all U.S. venture capital backed startups. Figure 1a plots a histogram of the positive company exit values. The distribution spans several orders of magnitude and is relatively similar to a lognormal, but with a right skew and fatter right tail. A stylized model highlights a key trade-off: accrual-based capital gains taxes dilute successful founders by forcing additional share sales before exit, a well known concern, yet they also provide insurance through tax credits to founders whose ventures fail, an aspect often overlooked. Quantitatively, advance taxation substantially reduces founders' ownership at exit: average founder shares fall about 25% under accrual-based taxation relative to realization based taxation. At the same time, accrual taxation increases the fraction of entrepreneurs with positive payoffs from around 16% to nearly 47%. Embedding these outcomes in a career-choice framework shows that the insurance value of accrual taxation partly offsets dilution costs: less risk-averse founders favor realization-based taxes, while more risk averse ones prefer accrual-based taxes. The strength of this insurance channel depends on the highly skewed distribution of entrepreneurial payoffs and the design of loss provisions under accrual-based taxation.
Takeaways by Macro Roundup® AI
The authors estimate that average founder shares at exit fall about 25% under accrual-based capital gains taxation relative to realization-based taxation, as advance taxation forces additional share sales before exit.
Accrual-based taxation raises the fraction of entrepreneurs with positive payoffs from around 16% to nearly 47%, providing insurance through tax credits to founders whose ventures fail.
In the authors' career-choice framework, less risk-averse founders favor realization-based taxes while more risk-averse founders prefer accrual-based taxes, with the insurance channel's strength depending on the skewed payoff distribution and loss-provision design.
Related Articles:
Killer Incentives: Status Competition and Pilot Performance during World War II— Analysis of over 5,000 German World War II fighter pilots finds that public peer recognition was associated with higher victory scores among skilled pilots without higher mortality, while average pilots gained little in victories but died at higher rates. The authors conclude status-based awards can have uneven effects in high-risk settings.
One Hundred Years in the U.S. Stock Markets— Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
Never Enough: Dynamic Status Incentives in Organizations— Data on over 5,000 German fighter pilots show performance rose markedly as pilots approached the eligibility threshold for each medal in a tiered awards ladder and slumped immediately after receiving it, with the effect repeating at each successive rung. The authors estimate the ladder added 3,000–5,000 aerial victories, 5–10% of the total.
AI Summary.The authors estimate that about $200bn of “missing” labor compensation would account for roughly a third of the fall in the labor share since the late 1970s, which workers owning a bit above 10% of corporate profits through stock compensation would cover. Spread across the 4.2m top-decile public company employees, that implies about $40,000 in additional pay each.
Owen Zidar and Eric ZwickThe Everywhere Millionaire
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Zidar & Zwick suggest about one‑third of the post‑1970s drop in labor’s share is due to stock‑based pay to workers, in addition to the one‑third they already attribute to pass‑through income. That leaves only around one‑third for genuine shifts in technology, power, etc.
Does stock compensation explain part of the falling labor share?
Core argument: The authors report 2017 employee compensation of $7.2 trillion against corporate value added of $12.2 trillion after adjusting for the rise of pass-throughs, with unadjusted corporate profits, which exclude partnership profits, at $1.7 trillion.
In our data for 2017, after adjustments for the rise of pass-throughs, we report employee compensation of $7.2 trillion and corporate value added of $12.2 trillion. The unadjusted corporate profits number (which excludes partnership profits) is $1.7 trillion. If we could find around $200 billion of “missing” labor compensation, that would account for about a third of the fall in the labor share since the late 1970s. Thus, if workers owned a bit above 10% of those corporate profits via stock compensation, then that would cover the difference. Distributing this amount across the top 10% of public company employees, of which there are 4.2 million, this ownership would imply an additional $40,000 or so in pay. The aggregate numbers are thus quite plausible in terms of how much pay might have shifted to corporate profits serving as tax-preferred payments to high earners.
Takeaways by Macro Roundup® AI
The authors report 2017 employee compensation of $7.2 trillion against corporate value added of $12.2 trillion after adjusting for the rise of pass-throughs, with unadjusted corporate profits, which exclude partnership profits, at $1.7 trillion.
The authors estimate that roughly $200 billion of "missing" labor compensation would account for about a third of the fall in the labor share since the late 1970s, a sum covered if workers owned somewhat above 10% of corporate profits via stock compensation.
Spread across the 4.2 million employees in the top 10% of public company workforces, that amount would imply about $40,000 in additional pay each, which the authors consider plausible as pay shifted into corporate profits serving as tax-preferred payments to high earners.
Related Articles:
Why the Labor Share Keeps Falling: Taxes!— The measured corporate labor share fell from 63% in 1978 to 58% in 2017, but the authors estimate that tax-driven reclassification of wages as S corporation profit and the shift of high-labor-share firms into partnerships account for about 1.6 percentage points, roughly a third of the decline.
Human Capitalists— Equity-based pay has grown to nearly 45% of total compensation for high-skilled workers, and counting it reduces the measured decline in labor share since the 1980s by over 60% while turning the high-skilled labor share decline into an increase of almost 1%. Such workers own 7% of public companies, earning over $85bn annually in equity compensation.
Capitalists in the Twenty-First Century— Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
AI Summary.Fully closing Social Security's funding gap by raising the payroll tax rate would require an immediate, permanent increase from 12.4% to 17.6%, which would reduce labor supply and economic growth. Research on a prior benefit cut found affected Americans raised earnings by 61 cents per dollar of lost benefits, generating additional payroll tax revenue.
Andrew BiggsAmerican Enterprise Institute
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Biggs argues that “fair” approaches to restoring Social Security solvency – those that do not cut already accrued benefits – are less effective than “unfair” ones that do, because the latter incentivize increased work effort, raising growth and revenue.
Does closing Social Security's gap with higher payroll taxes hurt growth?
Core argument: Keeping Social Security permanently solvent under the "fairness" model of paying accrued benefits in full would require an immediate and permanent payroll tax increase from 12.4% to 17.6%, which would decrease labor supply and reduce economic growth.
Imagine that Social Security reform follows the fairness model, in which accrued benefits are paid in full but the rate at which future benefits are earned is reduced. A simple way to do this is to increase the payroll tax rate To keep Social Security permanently solvent, meaning through 75 years and beyond, would require an immediate and permanent increase in the payroll tax rate [from] 12.4% to 17.6%. The higher rate would decrease labor supply and reduce economic growth. [Consider] an alternate reform, which looks clearly unfair: fix Social Security’s funding gap entirely by reducing accrued benefits that Americans already have earned. As of 2025, Americans had accrued $54 trillion in Social Security benefits. Social Security’s unfunded obligation as of 2025 was $26 trillion. So, roughly, this means cutting Americans’ “earned benefits” in half. [Analyzing the 1977 reform that undid the notorious 1972 “double-indexing” of benefits, a group of economists], using SSA earnings data, found that, for every dollar of lost benefits, the affected Americans increased their earnings by 61 cents. Moreover, these additional earnings would be taxed by Social Security, further strengthening the program’s finances. In effect, this makes cutting benefits a “cheaper” way to fix Social Security than raising taxes, because people respond in ways that also increase tax revenues.
Takeaways by Macro Roundup® AI
Keeping Social Security permanently solvent under the "fairness" model of paying accrued benefits in full would require an immediate and permanent payroll tax increase from 12.4% to 17.6%, which would decrease labor supply and reduce economic growth.
Americans had accrued $54 trillion in Social Security benefits as of 2025 against an unfunded obligation of $26 trillion, so closing the gap solely by cutting already-earned benefits would mean roughly halving those benefits.
Economists analyzing the 1977 reform that undid the 1972 "double-indexing" of benefits found, using SSA earnings data, that affected Americans raised their earnings by 61 cents per dollar of lost benefits, earnings that Social Security would tax.
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Social Security and Trends in Wealth Inequality— The authors estimate that including Social Security in household wealth leaves top wealth shares little changed over three decades, with the top 10% and top 1% shares rising 1.1 and 1.6 percentage points versus roughly 9 and 6 points for marketable wealth alone. Social Security wealth grew from $7tn to $39tn.
How Federal Spending is Distributed by Age— An analysis classifying $4.4tn of $7tn in federal spending by age finds retirees aged 65 and older receive $2.7tn, 38.6% of total outlays and 61.9% of age-assignable spending, versus $1.2tn for working-age adults and $449bn for those under 26. Social Security and Medicare account for 80% of age-assignable spending on older adults.
The Great “Transfer”-mation— Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
AI Summary.The measured corporate labor share fell from 63% in 1978 to 58% in 2017, but the authors estimate that tax-driven reclassification of wages as S corporation profit and the shift of high-labor-share firms into partnerships account for about 1.6 percentage points, roughly a third of the decline.
Owen Zidar And Eric ZwickThe Everywhere Millionaire
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A third of the 9pp drop in labor’s share of corporate income btw 2000 and 2025 is due to tax policy changes that incentivized business migration to partnerships, relabeling some earnings of the top 1% as pass-through income, lowering reported wages.
Does tax-driven business reclassification explain part of the falling labor share?
Core argument: The corporate-sector labor share fell from 63% in 1978 and about 64% in 2000 to 58% in 2017 and 55% in 2025, a headline decline of 5 percentage points from 1978 to 2017.
The corporate-sector labor share was 63% in 1978, fluctuated modestly through the 1980s and 1990s, and still stood near 64% in 2000. Then it fell to 58% in 2017 and 55% in 2025. Change of label pulls down the measured labor share because the national accounts count S corporation profit as capital income. When we add these recharacterized wages back into the labor income bucket, then the corporate labor share in 2017 is about 0.9 percentage points higher. In addition, many firms have left the corporate sector and reorganized as partnerships. Partnership profit has grown from 13% of all business profit in 1980 to 35% today. These partnerships have labor shares more than 10 percentage points higher than the corporate firms left behind. As these high-labor-share businesses left, the corporate sector that remained looked more capital-heavy than it used to. When we treat the partnership activity that migrated out since 1986 as if it had stayed in corporate form, the 2017 labor share is another 0.7 percentage points higher. These two corrections together are worth about 1.6 percentage points. The headline decline from 1978 to 2017 was 5 points. Our adjusted decline is 3.4. Thus, the tax code accounts for roughly a third of the decline.
Takeaways by Macro Roundup® AI
The corporate-sector labor share fell from 63% in 1978 and about 64% in 2000 to 58% in 2017 and 55% in 2025, a headline decline of 5 percentage points from 1978 to 2017.
Adding back S corporation profit that reflects recharacterized wages raises the 2017 corporate labor share by about 0.9 percentage points, since the national accounts count such profit as capital income.
Partnership profit rose from 13% of all business profit in 1980 to 35% today, and treating partnership activity that migrated out since 1986 as corporate adds another 0.7 percentage points, leaving an adjusted 1978–2017 decline of 3.4 points.
Related Articles:
What’s Missing in the Fed’s Data about Ultrarich Portfolios— The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
The Rise of Pass-Throughs and the Decline of the Labor Share— The authors estimate that reallocating business activity to its pre-1986 organizational form accounts for one-third of the decline in the corporate sector labor share, which fell from 62.9% to 57.9% between 1978 and 2017. US tax reform encouraged firms to organize as pass-through entities, letting income be characterized as profits rather than labor payments.
Capitalists in the Twenty-First Century— Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
AI Summary.Europe trains more engineering graduates per capita than China and more STEM PhDs than any region outside the United States, yet the only EU-born companies to reach $100bn market value in the past fifty years, Spotify and BioNTech, listed on US exchanges. Europe captures 6% of global AI startup funding versus 61% for the United States.
Mario KeputaSocial Science Research Network
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Despite top STEM talent and high savings, Europe captures just 6% of AI funding and lacks trillion-dollar firms. Between 2008 and 2021, ~30% of EU-founded unicorns relocated abroad, largely to the US, seeking deeper liquidity, higher valuations, and pro-growth regulation.
Why does Europe's world-class STEM talent fail to produce giant companies?
Core argument: Europe captures just 6% of global AI startup funding, versus 61% for the United States and 17% for China, despite training more engineering graduates per capita than China and more STEM PhDs than any region outside the U.S.
Europe produces more engineering graduates per capita than China. It trains more PhDs in STEM fields than any region outside the United States. Europe's universities rank among the world's best in dozens of disciplines. Europe's household savings rate exceeds that of America. Europe's research output, measured by publications and citations, is world-class. And yet the only EU-born companies to reach a market capitalisation of $100 billion in the past fifty years, Spotify and BioNTech, did so on the NYSE and Nasdaq respectively. Both chose American exchanges over European ones. None of the world's trillion-dollar companies is European. Europe captures just 6% of global AI startup funding, compared with 61% for the United States and 17% for China. Between 2008 and 2021, nearly 30% of European-founded unicorns relocated their headquarters abroad, overwhelmingly to the United States. They did not leave for the weather. They left because U.S. capital markets offered deeper liquidity, broader analyst coverage, higher valuations, and a regulatory environment designed for growth.
Takeaways by Macro Roundup® AI
Europe captures just 6% of global AI startup funding, versus 61% for the United States and 17% for China, despite training more engineering graduates per capita than China and more STEM PhDs than any region outside the U.S.
The only EU-born companies to reach $100bn market capitalisation in the past fifty years, Spotify and BioNTech, listed on the NYSE and Nasdaq respectively, and none of the world's trillion-dollar companies is European.
Nearly 30% of European-founded unicorns relocated their headquarters abroad between 2008 and 2021, overwhelmingly to the United States, where capital markets offered deeper liquidity, broader analyst coverage, higher valuations, and a regulatory environment designed for growth.
Related Articles:
Ed Conard Debates Furman On “The Expected Value of Risk Taking”— A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.
Do Adults Have the Skills They Need to Thrive in a Changing World?— An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
The Future of European Competitiveness – A Competitiveness Strategy for Europe— A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.
AI Summary.About half of the 1990s gap between American and European hours worked had reversed by the end of the 2010s. The authors estimate US hours per person declined after the 2000s because of rising benefits for the non-employed—especially health benefits like Medicaid—while non-US hours rose with higher wages and lower work costs.
Serdar Birinci, Loukas Karabarbounis, and Kurt SeeNational Bureau of Economic Research
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Work hours of Americans and Europeans were ~ equal in the early 1970s, but by the mid 1990s, Europeans worked much less than Americans. Half of this hours gap had vanished by 2019. The drop in US hours was collinear with an ~ doubling of Medicaid enrollment.
Why has the gap in hours worked between Americans and others narrowed?
Core argument: About half of the U.S.–Europe gap in hours worked that opened by the 1990s had reversed by the end of the 2010s, with the convergence concentrated on the extensive margin and observed for both men and women.
Whereas Americans and Europeans were working roughly the same hours in the early 1970s, by the mid 1990s, Americans were working much more than Europeans. We update Prescott’s observations on hours worked for advanced economies and document that about half of the hours gap in the 1990s has reversed by the end of the 2010s. While the decline in the U.S. hours is well documented in the literature, the increase in non-U.S. hours in the past two decades, both relative to the United States and in absolute levels, has not yet been analyzed systematically. The convergence in hours worked is concentrated on the extensive margin and is observed for both men and women. We offer a comparative study on the convergence of hours worked and ask, “Why do Americans no longer work so much more than non-Americans?” [Employing both nonstructural correlation analysis and a structural model of labor supply, we suggest that] U.S. hours per person declined after the 2000s because of the rise of benefits provided to the non-employed. Among these benefits, we find the most important role for health benefits and, in particular, Medicaid. For non-U.S. countries, the rise of labor supply is generally accounted for by a rise of wages and falling fixed costs and disutility of work.
Takeaways by Macro Roundup® AI
About half of the U.S.–Europe gap in hours worked that opened by the 1990s had reversed by the end of the 2010s, with the convergence concentrated on the extensive margin and observed for both men and women.
The authors attribute the post-2000s decline in U.S. hours per person to the rise of benefits provided to the non-employed, assigning the most important role to health benefits and, in particular, Medicaid.
Rising labor supply outside the United States is generally accounted for by higher wages and falling fixed costs and disutility of work, according to the authors' correlation analysis and structural model of labor supply.
Related Articles:
Hours Worked and Lifetime Earnings Inequality— US survey data show large differences in lifetime hours of work, and a calibrated model of labor supply and human capital accumulation implies that nearly 20% of the variance in lifetime earnings is accounted for by these differences, with 90% of that effect due to heterogeneity in preferences for work.
Comparing EU-to-US Output Per Hour— European Union output per hour worked has risen from about 72% of the US level in the early 2000s to about 82%. The EU's 28% shortfall in GDP per capita versus the US is roughly two-thirds attributable to lower output per hour and one-third to fewer hours worked; Germany's shortfall reflects fewer hours alone.
Europeans ‘Less Hard-Working’ Than Americans, Says Norway Oil Fund Boss— Norway's sovereign wealth fund argues that American companies are outpacing European rivals on innovation and technology because the US more readily accepts failure and risk and because Americans work harder and are more ambitious. US shares now make up almost half of the fund's equity holdings, up from 32% a decade earlier, while UK holdings fell from 15% to 6%.
AI Summary.The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
Owen Zidar and Eric ZwickThe Everywhere Millionaire
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Zidar and Zwick find SCF data show ownership share in private businesses make up between 45–50% of top 0.1% American wealth, and ~80% of US households worth $30mm+ are business owners.
Does official wealth data overstate how much the ultrarich own public stocks?
Core argument: The Survey of Consumer Finances shows private business at roughly 45–50% of top 0.1% wealth, far more than the Federal Reserve's Distribution of Financial Accounts "private business" label implies.
“Private businesses” make up a declining and now-modest share of top 0.1% wealth in the Federal Reserve’s Distribution of Financial Accounts (DFA), with corporate equities dominating portfolios at the very top. The misleading implication is that the rich are primarily stockholders. In fact, they are not. The issue, we learned, is that the DFA’s “private business” category is much narrower than what most people mean by the term. It covers only proprietor’s equity in noncorporate businesses — partnerships and sole proprietorships. Not S-corporations. Not other private corporations. Not financial partnerships like private equity or hedge funds. Just noncorporate, nonfinancial businesses. Private corporations are valued separately, but the Fed can’t distinguish households’ holdings of private corporate equity from their holdings of publicly traded stocks. They’re all lumped together into “corporate equities.” The Survey of Consumer Finances (SCF) tells a different story about what the top 0.1% actually owns. Private business shows up as roughly 45 to 50% of top wealth — far larger than the DFA’s “private business” label suggests. About 80% of households worth $30 million or more are business owners.
Takeaways by Macro Roundup® AI
The Survey of Consumer Finances shows private business at roughly 45–50% of top 0.1% wealth, far more than the Federal Reserve's Distribution of Financial Accounts "private business" label implies.
The Distribution of Financial Accounts' "private business" category covers only proprietor's equity in noncorporate, nonfinancial partnerships and sole proprietorships, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships.
The Federal Reserve cannot distinguish households' private corporate equity from publicly traded stocks, lumping both into "corporate equities," which makes the top 0.1% appear to be primarily stockholders.
Related Articles:
Top Wealth in America: New Estimates and Implications for Taxing the Rich— New estimates put the top 0.1%'s share of US wealth at 15%, up from 12.9% over a 15-year span, a smaller concentration than some earlier estimates but still leaving the top 1% holding nearly as much wealth as the bottom 90%. Pass-through business and public equity dominate top-end wealth, while pension and housing wealth dominate for the bottom 90%.
They’re Rich but Not Famous—and They’re Suddenly Everywhere— An analysis of Federal Reserve data estimates about 430,000 U.S. households are worth $30m or more, including roughly 74,000 worth at least $100m, with growth in the number of very rich households outpacing overall population growth over recent decades. Nearly 72% of the top 0.1%'s wealth consists of corporate equities, mutual fund shares, and private businesses.
Capitalists in the Twenty-First Century— Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
