Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, January 27, 2014

AI Summary. Estimated intergenerational earnings elasticity is about 0.5 in the US, meaning roughly 50% of parental income advantage passes to children, versus 0.2–0.3 in Nordic countries, indicating economic advantage and disadvantage persist more across generations in the US.

Robin Naylor, Eva Osterbacka, Andres Bjorklund, Tor Eriksson Forschungsinstitut zur Zukunft der Arbeit
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Intergenerational earnings mobility varies significantly across countries, with the US exhibiting lower mobility compared to Nordic countries and the UK. In the US, 50% of parental income advantages are passed to children, compared to 20-30% in Nordic countries.

Does parental income advantage persist more across generations in the US?

Core argument: The intergenerational earnings elasticity in the United States is roughly 0.5, meaning 50% of parental income advantages pass to children, versus 0.2–0.3 in the Nordic countries.

Intergenerational earnings mobility, a key indicator of economic opportunity, varies significantly across countries, with the US exhibiting lower mobility compared to Nordic countries and the UK. In the US, the elasticity of intergenerational earnings is approximately 0.5, indicating that 50% of parental income advantages are passed to children, compared to 0.2-0.3 in Nordic countries, where only 20-30% is transmitted. This suggests that economic advantages or disadvantages are more persistent across generations in the US. The Nordic model, characterized by robust social safety nets and equitable education systems, facilitates greater mobility. These findings highlight the need for policy interventions in the US to enhance economic mobility and address structural barriers that perpetuate income inequality across generations.

Takeaways by Macro Roundup® AI

  1. The intergenerational earnings elasticity in the United States is roughly 0.5, meaning 50% of parental income advantages pass to children, versus 0.2–0.3 in the Nordic countries.
  2. Comparison of the Nordic countries, the United Kingdom, and the United States finds lower intergenerational earnings mobility in the US, suggesting economic advantages and disadvantages persist more across generations there.
  3. Greater Nordic mobility is attributed to robust social safety nets and equitable education systems, with US policy interventions urged to address structural barriers that perpetuate income inequality across generations.

Denmark study. Jantti, Markus, Bernt Bratsberg, Knut Roed, Oddbjorn Raaum, Robin Naylor, Eva Osterbacka, Andres Bjorklund, Tor Eriksson, "American Exceptionalism in a New Light: A Comparison of Intergenerational Earnings Mobility in the Nordic Countries, the United Kingdom and the United States" Forschungsinstitut zur Zukunft der Arbeit, January 2006. New Available at:http://ftp.iza.org/dp1938.pdf

Monday, February 24, 2014

AI Summary. The authors estimate that the spread of performance-based pay such as bonuses and commissions accounts for 24% of the growth in male wage variance and nearly all top-end wage dispersion growth for the top fifth of earners. Performance-pay jobs, which expanded from 30% to over 40% of jobs, show returns to education and experience 40–60% higher than other jobs.

Lemieux, Thomas, MacLeod, W Bentley, and Daniel Parent National Bureau of Economic Research
Date Posted:
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Performance pay has significantly contributed to wage inequality, explaining 24% of male wage variance growth from the late 1970s to early 1990s. @LemieuxThomas @MacLeodW @DanielParent

How much of wage inequality growth does performance pay explain?

Core argument: Performance-based pay, including bonuses and commissions, explains 24% of the growth in male wage variance from the late 1970s to the early 1990s and nearly all top-end wage dispersion growth for the top quintile.

The rise of performance-based pay, including bonuses and commissions, has significantly contributed to wage inequality, explaining 24% of the growth in male wage variance from the late 1970s to early 1990s and nearly all top-end wage dispersion growth for the top quintile. Wage inequality is greater and has risen faster in performance-pay jobs compared to others during the 1980s. The adoption of performance pay expanded from 30% of jobs in the late 1970s to over 40% by the 1990s, rewarding positive worker characteristics with returns on education and experience exceeding those in non-performance-pay jobs by 40-60%. Advances in compensation technology have enhanced worker-firm matches and productivity, with performance pay aligning wages more closely with workers' marginal products than non-performance pay systems.

Takeaways by Macro Roundup® AI

  1. Performance-based pay, including bonuses and commissions, explains 24% of the growth in male wage variance from the late 1970s to the early 1990s and nearly all top-end wage dispersion growth for the top quintile.
  2. Performance pay spread from 30% of jobs in the late 1970s to over 40% by the 1990s, with returns to education and experience in those jobs exceeding non-performance-pay jobs by 40–60%.
  3. Wage inequality is greater and rose faster in performance-pay jobs than in other jobs during the 1980s, and performance pay aligns wages more closely with workers' marginal products than non-performance-pay systems.

Lemieux, Thomas, MacLeod, W Bentley, and Daniel Parent, “Performance Pay and Wage Inequality” NBER Working Paper No. 13128. May 2007. Available at:http://www.nber.org/papers/w13128 According to the paper the rise of performance based pay (bonuses, commissions, and price-rates) can explain 24 percent of the growth in the variance of male wages between the late 1970s and the early 1990s, and accounts for nearly all of the top-end growth in wage dispersion for the top quintile.

Wage inequality is generally greater in performance-pay jobs than in other jobs, and that inequality has risen faster in performance-pay jobs than in other jobs during the 1980’s

Adaptation of performance pay has been widespread, growing from 30 percent of jobs in the late 1970 to more than 40 percent by the 1990s.

This has had the effect of rewarding positive worker characteristics - the return to education and experience in performance-pay jobs has exceeded that of the return on non-performance-pay jobs by factor in the 40-60 percent range.

The rise in “technology of compensation” such as effective measurement systems and new payment schemes has allowed firms to improve the quality of a “worker-firm match” and as well as employee productivity. Performance pay is an indicator that firms pay wages that are closer to the marginal product of workers than firms that do not use performance pay.