Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, June 1, 2015

AI Summary. Across seven large developed economies, the only long-term increase in capital's share of income is in housing, according to an analysis that subtracts depreciation to measure net capital income. Industries using short-lived assets such as software show high gross capital shares but low net shares, because rapid obsolescence absorbs returns.

Matthew Rognile Brookings Papers on Economic Activity
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Rognile’s analysis of 7 large developed economies shows only housing has a long-term increase in capital’s share of income. Net capital income is low due to rapid obsolescence & returns aligned with labor, not capitalists @MatthewRognlie BrookingsPapers.

Is housing the only source of capital's rising income share?

Core argument: Rognlie finds that across seven large developed economies — the US, Japan, Germany, France, the UK, Italy, and Canada — housing is the only sector showing a long-term rise in capital's share of income.

Rognlie's analysis of seven large developed economies (US, Japan, Germany, France, UK, Italy, and Canada) reveals that the only long-term increase in capital's share of income is in housing. By subtracting depreciation, he calculates net capital income and highlights that industries with short-lived assets like software show a high gross capital share due to capital's direct role in production. However, the net capital share remains low as returns are more aligned with labor, such as software engineers, rather than capitalists. This suggests that while capital's role in production is significant, its net contribution is diminished by rapid obsolescence, emphasizing the importance of understanding depreciation's impact on capital income distribution.

Takeaways by Macro Roundup® AI

  1. Rognlie finds that across seven large developed economies — the US, Japan, Germany, France, the UK, Italy, and Canada — housing is the only sector showing a long-term rise in capital's share of income.
  2. Subtracting depreciation to compute net capital income, Rognlie shows that industries relying on short-lived assets such as software post a high gross capital share while their net capital share stays low.
  3. Rognlie attributes the low net capital share in software-intensive industries to returns accruing to labor such as software engineers rather than to capitalists.

Rognlie subtracts depreciation in seven large developed economies (US, Japan, Germany, France, the UK, Italy, and Canada) to get net capital income, and finds that the only long-term rise in capital’s share of income is in housing. Rognile, Matthew, "Deciphering the fall and rise in the net capital share,"Brookings Papers on Economic Activity, March 19, 2015. Available at:http://www.brookings.edu/about/projects/bpea/papers/2015/land-prices-evolution-capitals-share"...For instance, in an industry where most of the output is produced by short-lived software, the gross capital share will be high, evincing the centrality of capital’s direct role in production. At the same time, the net capital share may be low, indicating that the returns from production ultimately go more to software engineers than capitalists—whose return from production is offset by a loss from capital that rapidly becomes obsolete...."

Friday, June 5, 2015

AI Summary. Top marginal tax rates are associated with where the top 1% of "superstar" inventors choose to locate, with an estimated elasticity to the net-of-tax rate of 0.04–0.06 for domestic inventors and about 1.3 for foreign ones. The authors estimate a 10 percentage point cut in top tax rates would retain 1% more domestic and attract 38% more foreign superstar inventors.

Ufuk Akcigit, Salomé Baslandze and Stefanie Stantcheva National Bureau of Economic Research
Date Posted:
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Top tax rates significantly influence where “superstar” inventors locate, with a 10% decrease in top tax rates potentially retaining 1% more domestic and attracting 38% more foreign inventors.

Do top tax rates influence where star inventors locate?

Core argument: Using US and European Patent Office data since 1977, the study estimates the elasticity of foreign superstar inventors' location to the net-of-tax rate at roughly 1.3, versus 0.04–0.06 for domestic inventors.

The study examines the impact of top tax rates on inventors' mobility since 1977, focusing on "superstar" inventors with the most valuable patents. Using data from US and European Patent Offices, it finds that top 1% inventors are significantly influenced by top tax rates when deciding where to locate. The elasticity of domestic inventors to the net-of-tax rate is small, between 0.04 and 0.06, while for foreign inventors it is much larger, around 1.3. A 10 percentage point decrease in top tax rates could retain 1% more domestic and attract 38% more foreign superstar inventors. Inventors in multinational companies are more likely to exploit tax differentials, whereas those in firms with a higher share of research in a country are less sensitive to tax rates. The findings highlight the importance of tax policy in shaping the global distribution of top talent.

Takeaways by Macro Roundup® AI

  1. Using US and European Patent Office data since 1977, the study estimates the elasticity of foreign superstar inventors' location to the net-of-tax rate at roughly 1.3, versus 0.04–0.06 for domestic inventors.
  2. The study estimates that a 10 percentage point cut in top tax rates would retain 1% more domestic and attract 38% more foreign superstar inventors, those holding the most valuable patents.
  3. Inventors employed by multinational companies are more likely to exploit tax differentials, while those in firms concentrating a higher share of research in a country are less sensitive to top tax rates.

"...paper studies the effect of top tax rates on inventors’ mobility since 1977. We put special emphasis on “superstar” inventors, those with the most and most valuable patents. We use panel data on inventors from the United States and European Patent Offices to track inventors’ locations over time and combine it with international effective top tax rate data. We construct a detailed set of proxies for inventors’ counterfactual incomes in each possible destination country including, among others, measures of patent quality and technological fit with each potential destination. We find that superstartop 1% inventors are significantly affected by top tax rates when deciding where to locate. The elasticity of the number of domestic inventors to the net-of-tax rate is relatively small, between 0.04 and 0.06, while the elasticity of the number of foreign inventors is much larger, around 1.3. The elasticities to top net-of-tax rates decline as one moves down the quality distribution of inventors. Inventors who work in multinational companies are more likely to take advantage of tax differentials. On the other hand, if the company of an inventor has a higher share of its research activity in a given country, the inventor is less sensitive to the tax rate in that country...We find that the superstar top 1% inventors are significantly affected by top tax rates when choosing where to locate. As one moves down the quality distribution of inventors, the sensitivity to top tax rates decreases. The elasticity of the number of top 1% domestic inventors to the net of tax rate is small, around 0.04. On the other hand, the elasticity of foreign top 1% superstar inventors is much larger around 1.3. Put differently, for a 10 percentage point decrease in top tax rates, the average country would be able to retain 1% more domestic superstar inventors and attract 38% more foreign superstar inventors. To put these numbers into perspective, the elasticity of the number of domestic football players in Kleven, Landais and Saez (2013) to the net of tax rate ranges from 0.07 to 0.16 depending on the estimate, and the elasticity of the number of foreign players ranges from 0.6 to 1.3...." Akcigit, Ufuk, Salomé Baslandze and Stefanie Stantcheva, "Taxation and the International Mobility of Inventors,"NBER, March 2015. Available at:http://www.nber.org/papers/w21024