Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
Upside of Inequality Oxford Unintended Consequences

Other Comparison

Comparative research that does not fit the archive’s country, historical, demographic, geographic, political, sector, or skill-based groupings. These articles use other relevant contrasts to illuminate economic and social outcomes.

AI Summary. The share of Americans identifying as white and Christian fell from 65% to 43% over roughly two decades, a decline of nearly one-third, before ticking up to 44%. Religiously unaffiliated Americans now make up 23% of the population, nearly one in four.

Robert Jones The Public Religion Research Institute
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The proportion of Americans identifying as white and Christian has seen a significant decline over the past few decades, dropping from 65% in 1996 to 54% in 2006, and further to 43% by 2017.

Is the share of Americans who are white and Christian declining?

Core argument: Americans identifying as white and Christian fell from 65% in 1996 to 54% in 2006 and 43% in 2017, a decline of nearly one-third in the white Christian share of the population.

The proportion of Americans identifying as white and Christian has seen a significant decline over the past few decades, dropping from 65% in 1996 to 54% in 2006, and further to 43% by 2017. This trend reflects broader demographic shifts and cultural changes within the U.S., with the white Christian population decreasing by nearly one-third. In 2020, the percentage slightly rebounded to 44%, indicating a potential slowing of this decline. Meanwhile, religiously unaffiliated Americans have grown to comprise nearly one in four (23%), highlighting a shift towards secularism. These changes have implications for economic and policy considerations, as religious affiliation can influence consumer behavior, political preferences, and social values. Understanding these dynamics is crucial for businesses and policymakers aiming to navigate the evolving cultural landscape.

Takeaways by Macro Roundup® AI

  1. Americans identifying as white and Christian fell from 65% in 1996 to 54% in 2006 and 43% in 2017, a decline of nearly one-third in the white Christian share of the population.
  2. The white Christian share edged up to 44% in 2020, indicating a potential slowing of the decline.
  3. Religiously unaffiliated Americans have grown to nearly one in four, at 23% of the population.

Lay of the land of Americans religiosity in 2020, "....According to PRRI’s 2020 American Values Atlas, seven in ten Americans (70%) identify as Christian, including more than four in ten who identify as white Christian and more than one quarter who identify as Christian of color. Nearlyone in four Americans (23%) are religiously unaffiliated, and 5% identify with non-Christian religions. The most substantial cultural and political divides are between white Christians and Christians of color. More than four in ten Americans (44%) identify as white Christian, including white evangelical Protestants (14%), white mainline (non-evangelical) Protestants (16%), and white Catholics (12%), as well as small percentages who identify as Latter-day Saint (Mormon), Jehovah’s Witness, and Orthodox Christian.2 Christians of color include Hispanic Catholics (8%), Black Protestants (7%), Hispanic Protestants (4%), other Protestants of color (4%), and other Catholics of color (2%).3 The rest of religiously affiliated Americans belong to non-Christian groups, including 1% who are Jewish, 1% Muslim, 1% Buddhist, 0.5% Hindu, and 1% who identify with other religions. Religiously unaffiliated Americans comprise those who do not claim any particular religious affiliation (17%) and those who identify as atheist (3%) or agnostic (3%). Over the last few decades, the proportion of the U.S. population that is white Christian has declined by nearly one-third. As recently as 1996, almost two-thirds of Americans (65%) identified as white and Christian. By 2006, that had declined to 54%, and by 2017 it was down to 43%.4 The proportion of white Christians hit a low point in 2018, at 42%, and rebounded slightly in 2019 and 2020, to 44%. That tick upward indicates the decline is slowing from its pace of losing roughly 11% per decade...."

The 2020 Census of American Religion: Extended Excerpt Image 1


Robert Jones Natalie Jackson, Diana Orcés and Ian Huff, "The 2020 Census of American Religion," The Public Religion Research Institute, July 2021, https://www.prri.org/research/2020-census-of-american-religion/

AI Summary. Estimates based on Social Security and Medicare trustees' reports project that a married couple with two average earners retiring in 2020 will receive $1.167m in lifetime benefits after paying $760,000 in taxes, a net benefit of $407,000. For a comparable couple retiring in 2040, the projected net benefit is $718,000.

Eugene Steuerle Urban Institute
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A married couple with two average earners retiring in 2020 will receive $407,000 more in benefits from Medicare and Social Security than they paid in taxes, for same couple retiring in 2040 net benefit is $718,000.

How much do lifetime retirement benefits exceed taxes paid?

Core argument: A married couple with two average earners retiring in 2020 will receive $1.167m in Social Security and Medicare benefits against $760,000 in taxes paid, a net benefit of $407,000.

A married couple with two average earners retiring in 2020 will receive $1.167m in Medicare and Social Security benefits, having paid $760,000 in taxes, resulting in a net benefit of $407,000. For a similar couple retiring in 2040, the net benefit increases to $718,000. This trend reflects the growing disparity between benefits received and taxes paid, driven by demographic shifts and policy changes. The data, derived from the 2018 Social Security and Medicare trustees' reports, highlight the increasing financial advantage for future retirees. The calculations consider sex-adjusted probabilities for post-65 mortality and a discount rate of 2% plus inflation, underscoring the long-term fiscal implications for government programs. This scenario raises critical questions about the sustainability of current funding structures for Social Security and Medicare as the population ages.

Takeaways by Macro Roundup® AI

  1. A married couple with two average earners retiring in 2020 will receive $1.167m in Social Security and Medicare benefits against $760,000 in taxes paid, a net benefit of $407,000.
  2. For a similar two-average-earner couple retiring in 2040, the net benefit rises to $718,000.
  3. The calculations, derived from the 2018 Social Security and Medicare trustees' reports, use sex-adjusted post-65 mortality probabilities and a discount rate of 2% plus inflation.

A married couple with two average earners (103,800) who retires in 2020 year will receive $1,167,00 in Medicare and Social Security benefits, in exchange they will have paid $760,000 in taxes for a net benefit of $407,000 over their lifetime.

For that same couple retiring in 2030 the net benefit is $529,000, for 2040 the net benefit is $718,000

"...The following tables show the expected present value at age 65 of benefits received in retirement and taxes paid over a career for households with different earnings and marriage histories. The underlying data come from the 2018 Social Security and Medicare trustees’ reports (Social Security Board of Trustees 2018; Medicare Boards of Trustees 2018) and supplemental data published by the Social Security Administration and Centers for Medicare & Medicaid Services (CMS). For Medicare lifetime benefits, we use an alternative cost scenario that CMS developed based on its concern that measures in current law would result in a rate of decline in reimbursement rates relative to private health insurance that were not sustainable. (See the discussion of the Medicare cost scenario on page 23. In calculating expected present values, we use sex-adjusted probabilities to account for chance of death after age 65 and a discount rate of 2 percent plus inflation...."

Social Secuirty and Medicare Lifetime Benefits and Taxes: Extended Excerpt Image 1


C Eugene Steuerle and Caleb Quakenbush, "Social Secuirty and Medicare Lifetime Benefits and Taxes," Urban Institute, October 2018, https://www.urban.org/sites/default/files/publication/99232/social_security_and_medicare_lifetime_benefits_and_taxes_2018_update.pdf

AI Summary. Economic data show a strong correlation between GDP per person and life satisfaction, with a 10% rise in GDP per person associated with a 0.5-point increase in life satisfaction on a 10-point scale. During economic downturns, life satisfaction scores in affected countries fell by an average of 1 point.

Economist Staff The Economist
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A 10% rise in GDP/person is associated with a 0.5-point increase in life satisfaction on a 10-point scale, according to @TheEconomist. Recessions can drop life satisfaction scores by 1 point, highlighting the importance of economic growth & stability.

Does higher income raise life satisfaction, and do downturns lower it?

Core argument: A 10% rise in GDP per person is associated with a 0.5-point increase in life satisfaction on a 10-point scale.

Economic data reveals a strong correlation between GDP per person and life satisfaction, indicating that higher income levels often lead to increased happiness. Studies show that a 10% rise in GDP per person is associated with a 0.5-point increase in life satisfaction on a 10-point scale. Conversely, during economic downturns, such as the 2008 financial crisis, life satisfaction scores dropped by an average of 1 point in affected countries. This suggests that recessions not only impact financial stability but also significantly affect overall well-being. Policymakers should consider these findings when designing economic policies, as boosting GDP could enhance societal happiness, while mitigating recession impacts could preserve it. The data underscores the importance of economic growth and stability in improving quality of life across populations.

Takeaways by Macro Roundup® AI

  1. A 10% rise in GDP per person is associated with a 0.5-point increase in life satisfaction on a 10-point scale.
  2. Life satisfaction scores fell by an average of 1 point in countries affected by the 2008 financial crisis.
  3. Economic data suggests policymakers should weigh well-being when designing economic policy, as boosting GDP could enhance societal happiness and mitigating recession impacts could preserve it.

Economist Staff, "Money really can buy happiness and recessions can take it away,"The Economist, July 11, 2020, https://www.economist.com/graphic-detail/2020/07/11/money-really-can-buy-happiness-and-recessions-can-take-it-away

AI Summary. Bank loans have fallen from 40% to 30% of total U.S. non-financial business debt over the past decade, while non-bank loans and securities have risen from 60% to 70%, shifting credit provision from banks to capital markets.

Economist Staff The Economist
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Banks are losing out to capital markets in credit provision. Non-financial business debt as a % of GDP is increasingly reliant on non-bank loans & securities, with bank loans declining from 40% to 30% over the past decade.

Are capital markets taking over business credit from banks?

Core argument: Bank loans' share of total non-financial business debt fell from 40% to 30% over the past decade, while non-bank loans and securities rose from 60% to 70%.

The shift in credit provision from banks to capital markets is evident as non-financial business debt as a % of GDP increasingly relies on non-bank loans and securities. Over the past decade, the share of bank loans in total business debt has declined from 40% to 30%, while non-bank loans and securities have risen from 60% to 70%. This trend highlights the growing role of capital markets in financing, driven by factors such as regulatory changes and the search for higher yields. The implications are significant for banks, which face increased competition and pressure to innovate, and for policymakers, who must consider the stability and efficiency of financial systems. As businesses diversify their funding sources, the resilience of the economy may improve, but it also raises questions about market volatility and the potential for systemic risks.

Takeaways by Macro Roundup® AI

  1. Bank loans' share of total non-financial business debt fell from 40% to 30% over the past decade, while non-bank loans and securities rose from 60% to 70%.
  2. The shift in credit provision from banks toward capital markets is attributed to factors such as regulatory changes and the search for higher yields, leaving banks facing increased competition and pressure to innovate.
  3. Diversification of business funding sources may improve economic resilience while raising questions for policymakers about market volatility and potential systemic risks.

Economist Staff, "Banks lose out to capital markets when it comes to credit provision,"The Economist, July 25, 2020, https://www.economist.com/finance-and-economics/2020/07/25/banks-lose-out-to-capital-markets-when-it-comes-to-credit-provision

AI Summary. Measuring U.S. bilateral trade balances by value added rather than gross flows changes them substantially: deficits with Canada and Mexico average 40% smaller and the deficit with China is 20% smaller, while the deficit with Japan is 40% larger and the deficit with South Korea doubles. The differences reflect foreign and U.S. content embedded in exports through global supply chains.

B. Ravikumar and Brian Reinbold Federal Reserve Bank of St. Louis
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US Bilateral Trade Balance Adjusted For Valued Added Versus Gross Trade Shrinks Deficit 40% With Canada And Mexico, 20% WIth China, Grows Deficit 40% With Japan, Twice As Large WIth ROK.

Does measuring trade by value added change bilateral deficits?

Core argument: The U.S. bilateral trade deficit with Canada and Mexico is on average 40% smaller when measured in value-added rather than gross terms, reflecting the U.S. content embedded in those countries' exports, and the 2015 Mexico deficit was halved.

The U.S. bilateral trade balance shows significant variation when comparing value-added trade to gross trade. With Canada and Mexico, the U.S. trade deficit is 40% smaller on average when considering value-added trade, reflecting the reliance on U.S. content in exports. In 2015, the deficit with Mexico was halved under this measure. Conversely, the deficit with China is 20% smaller, while it grows 40% with Japan and doubles with South Korea, highlighting the role of high value-added foreign content in Chinese exports. These shifts underscore the importance of accounting for global supply chain complexities in trade statistics.

Takeaways by Macro Roundup® AI

  1. The U.S. bilateral trade deficit with Canada and Mexico is on average 40% smaller when measured in value-added rather than gross terms, reflecting the U.S. content embedded in those countries' exports, and the 2015 Mexico deficit was halved.
  2. The U.S. deficit with China is 20% smaller on a value-added basis, reflecting the high value-added foreign content in Chinese exports.
  3. Measured in value-added terms, the U.S. deficit with Japan grows 40% and the deficit with South Korea doubles.

New FRBSL note:“…U.S. bilateral trade balance can vary significantly depending on whether one looks at value-added trade or gross trade. For example, the U.S. trade deficit with Canada and Mexico shrinks considerably and is on average 40 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance. Futhermore, the U.S. trade deficit with Mexico was cut in half in 2015. These changes likely reflect the fact that many exports to the U.S. rely on content from other countries including the U.S., as we saw in the vehicle example. Also, the U.S. trade deficit with China is on average 20 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance, but it is 40 percent larger with Japan and twice as large with South Korea. Again, these changes likely reflect the fact that many Chinese exports to the U.S. rely on higher value-added foreign content(e.g., from Japan and South Korea)….”B. Ravikumar and Brian Reinbold, "Value-Added Trade vs. Gross Trade," Federal Reserve Bank Of St. Louis, June 2020, https://research.stlouisfed.org/publications/economic-synopses/2020/02/14/value-added-trade-vs-gross-tradeValue-Added Trade vs. Gross Trade

2"Measuring Trade in Value Added," inInterconnected Economies: Benefiting from Global Value Chains. OECD Publishing, Paris, 2013.

1de Gortari, Alonso. "Disentangling Global Value Chains." Working Paper, November 2019.

Notes

Conventional trade statistics may have been sufficient when goods were produced entirely within a nation's borders and then exported to other countries; but with increasingly complicated supply chains and an increasingly interconnected global economy, value-added trade can provide a more accurate picture of global trade.

Also, the U.S. trade deficit with China is on average 20 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance, but it is 40 percent larger with Japan and twice as large with South Korea. Again, these changes likely reflect the fact that many Chinese exports to the U.S. rely on higher value-added foreign content (e.g., from Japan and South Korea).

For example, the U.S. trade deficit with Canada and Mexico shrinks considerably and is on average 40 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance. Futhermore, the U.S. trade deficit with Mexico was cut in half in 2015. These changes likely reflect the fact that many exports to the U.S. rely on content from other countries including the U.S., as we saw in the vehicle example.

Value-Added Trade vs. Gross Trade: Extended Excerpt Image 1


We see from the figure that the U.S. bilateral trade balance can vary significantly depending on whether one looks at value-added trade or gross trade.

The Organisation for Economic Co-operation and Development provides value-added trade statistics from 2005-15.2The figure shows the U.S. trade balance from 2005-15 with several major trading partners in terms of real gross trade and real value-added trade.

Additionally, as we saw in the vehicle example above, such measures neglect the role of other countries in the supply chain. One way to combat this issue is to look at the value added, such as labor compensation and profits, by each country at each step of the production process. This provides a better way of incorporating the intricacies of today's global supply chain into trade accounting.

Traditional trade measures record gross, or total, flows of goods and services every time they cross a border. This includes the cost of inputs plus the value added by each country. Such traditional trade measures lead to double counting because countries trade intermediate goods for further processing.

For example, when Mexico assembles a vehicle, only one-third of the vehicle's value is derived from Mexican parts and labor. The rest is due to foreign components; about 74 percent of these foreign parts is imported from the U.S.1However, when Mexico ships this vehicle to the U.S., the entire factory cost of the vehicle, which includes the cost ofall of the partsand assembly, will be added to the U.S. trade deficit with Mexico despite the fact that much of the vehicle's value comes from U.S. parts. In other words, the U.S. would run a much larger trade deficit in terms of gross trade with Mexico than in terms of value-­added trade.

The rise of globalization has led to increasingly complicated supply chains. Raw materials and intermediate goods now move strategically throughout the world before a final good reaches the consumer. Traditional measures of trade often do a poor job of capturing this complexity.

AI Summary. Standard measures of tax progressivity are argued to mislead by ignoring transfer payments, the double taxation of future income from savings, and age differences. On a remaining-lifetime-resources basis for 40-year-olds, the author estimates the top 1% face a 34.5% net tax rate while the bottom quintile receives a 46.6% net subsidy.

Laurence Kotlikoff Wall Street Journal
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@LaurenceKotlikoff, The analysis of wealth inequality by Kotlikoff highlights key misconceptions in tax progressivity assessments, focusing on gross rather than net taxes & overlooking transfer payments like Social Security that benefit the poor.

Do standard tax progressivity measures understate how much the wealthy pay?

Core argument: Kotlikoff's analysis finds that among 40-year-olds, the top 1% face a 34.5% net tax rate on remaining lifetime resources while the bottom quintile receives a 46.6% net subsidy.

The analysis of wealth inequality by Kotlikoff highlights key misconceptions in tax progressivity assessments. A major error is focusing on gross rather than net taxes, overlooking transfer payments like Social Security that benefit the poor. Saez and Zucman's approach, which measures progressivity on a one-year basis, fails to account for double taxation on future income from savings, understating taxes for the wealthy who save more. Age adjustments are also neglected, skewing perceptions of tax fairness as older individuals appear to pay less due to past tax contributions. For 40-year-olds, the top 1% face a 34.5% net tax rate on remaining lifetime resources, while the bottom quintile receives a 46.6% net subsidy. Current-year net rates further misrepresent progressivity, ranging from -9.8% for the bottom 20% to 38.2% for the top 1%. These insights challenge prevailing narratives and underscore the complexity of accurately assessing tax burdens across different demographics.

Takeaways by Macro Roundup® AI

  1. Kotlikoff's analysis finds that among 40-year-olds, the top 1% face a 34.5% net tax rate on remaining lifetime resources while the bottom quintile receives a 46.6% net subsidy.
  2. Measured on current-year net rates, Kotlikoff reports tax burdens ranging from -9.8% for the bottom 20% to 38.2% for the top 1%.
  3. Kotlikoff argues that progressivity assessments err by using gross rather than net taxes, ignoring transfers such as Social Security, and that Saez and Zucman's one-year measure omits double taxation on future income from savings and age adjustments.

The biggest mistake is to focus on gross, not net, taxes. They ignore transfer payments, like Social Security, which are disproportionately paid to the poor. In doing so, they mistake language for economics.

Messrs. Saez and Zucman’s second mistake is measuring progressivity on a one-year rather than a remaining-lifetime basis. That ignores the fiscal system’s double taxation: Income earned, taxed and saved this year will be subject to future taxation on interest, dividends and capital gains. This omission disproportionately understates taxes for the rich, who save at a higher rate. The current-year focus also understates benefits paid to the poor, since future benefits are a bigger share of their resources.

Their third mistake is failing to adjust for age. The old have paid most of their lifetime taxes, which makes them now look like tax cheats, particularly those who saved out of previously highly taxed labor income. With changing demographics, this problem will deeply confuse tax progressivity comparisons over time.

I’ll focus on 40-year-olds, but the results are similar for all age groups. Each dollar of pretax remaining lifetime resources of those in the top 1% of the resource distribution is, on average, taxed on net at a 34.5% rate. For those in the top quintile, the average net tax rate is 28.4%. For those in the bottom quintile, every dollar of pre-tax resources is matched by a 46.6% netsubsidy. (The tax rises steadily to 4.2% for the second quintile, 12.6% for the third and 18.5% for the fourth.)

The average net rates for the current year only (not including future net taxes) for this cohort understate true progressivity. They range from negative 9.8% for the bottom 20% to positive 38.2% for the top 1%.

40 to 50 year olds:

Richest 1%

Poorest 25%

40 to 49 years

Net tax rate

Share of consumption

Share of income

Share of wealth

Richest 1%

34.5%

14.5%

17.9%

34.3%

Highest 20%

28.5%

Lowest 20%

(46.6)

7.3

4.0

0.6

Laurence Kotlikoff, “Tax Myths Of Warrenomics,” Wall Street Journal, October 17, 2019, https://www.wsj.com/articles/tax-myths-of-warrenomics-11571351806

AI Summary. Households between the 80th and 99th percentiles saw their share of pretax income rise from 29% to 31%, while the top 1% share rose from 9% to 16% and the bottom 20% share fell from 7% to 5%.

CBO Staff Congressional Budget Office
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The share of pretax income for households in the 80th to 99th % increased modestly from 29% to 31% btw 1979 and 2016, @USCBOOffice reports.

How has the share of pretax income shifted across households?

Core argument: The top 1% of households saw their share of pretax income rise from 9% to 16% between 1979 and 2016.

Between 1979 and 2016, the share of pretax income for households in the 80th to 99th % increased modestly, reflecting a shift in income distribution. This group saw their share rise from 29% to 31%, indicating a gradual concentration of income among higher earners. In contrast, the bottom 20% experienced a decline in their share from 7% to 5%, highlighting growing income inequality. The top 1% saw a more significant increase, with their share rising from 9% to 16%, underscoring the disproportionate gains at the very top. These changes suggest that while the middle-upper income brackets have seen some growth, the most substantial gains have been concentrated among the wealthiest, raising concerns about economic disparity and its implications for economic policy and social equity.

Takeaways by Macro Roundup® AI

  1. The top 1% of households saw their share of pretax income rise from 9% to 16% between 1979 and 2016.
  2. Households in the 80th to 99th percentiles increased their share of pretax income from 29% to 31% between 1979 and 2016.
  3. The bottom 20% of households saw their share of pretax income fall from 7% to 5% between 1979 and 2016.

Congressional Budget Office (CBO). July 9, 2019. “The Distribution of Household Income, 2016.”https://www.cbo.gov/publication/55413

AI Summary. The US has seen a decline in business startups and employment dynamism, with the share of employment at young firms falling by nearly 30% over 30 years. The authors argue this indicates weakened incentives to start new firms and supports policies that encourage entrepreneurship.

Ryan Decker, John Haltiwanger, Ron Jarmin, and Javier Miranda Journal of Economic Perspectives
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US business startups and employment dynamism have declined, with the share of employment by young firms decreasing by nearly 30% over the last 30 years

Has US startup activity and employment at young firms declined?

Core argument: The share of US employment at young firms has fallen by nearly 30% over the past 30 years, indicating a reduced role for dynamic young businesses in the economy.

The US has experienced a notable decline in business startups and employment dynamism, with the trend accelerating post-2000. Over the last 30 years, the share of employment by young firms has decreased by nearly 30%, indicating a reduced role for dynamic young businesses in the economy. This decline suggests that incentives for entrepreneurs to start new firms have diminished, impacting economic growth and productivity. While the optimal pace of business dynamics is complex to define, the evidence points to a need for policies that encourage entrepreneurship to revitalize job creation and economic dynamism.

Takeaways by Macro Roundup® AI

  1. The share of US employment at young firms has fallen by nearly 30% over the past 30 years, indicating a reduced role for dynamic young businesses in the economy.
  2. US business startups and employment dynamism have declined, with the trend accelerating after 2000, suggesting that incentives for entrepreneurs to found new firms have diminished.
  3. Although the optimal pace of business dynamics is difficult to define, the evidence points to a need for policies encouraging entrepreneurship to revitalize job creation and economic dynamism.

“…An optimal pace of business dynamics—encompassing the processes of entry, exit, expansion, and contraction—would balance the benefits of productivity and economic growth against the costs to firms and workers associated with reallocation of productive resources. It is difficult to prescribe what the optimal pace should be, but evidence accumulating from multiple datasets and methodologies suggests that the rate of business startups and the pace of employment dynamism in the US economy has fallen over recent decades and that this downward trend accelerated after 2000. A critical factor in accounting for the decline in business dynamics is a lower rate of business startups and the related decreasing role of dynamic young businesses in the economy. For example, the share of US employment accounted for by young firms has declined by almost 30 percent over the last 30 years.These trends suggest that incentives for entrepreneurs to start new firms in the United States have diminished over time. We do not identify all the factors underlying these trends in this paper but offer some clues based on the empirical patterns for specific sectors and geographic regions….”

Decker, Ryan, John Haltiwanger, Ron Jarmin, and Javier Miranda. Summer 2014. “The Role of Entrepreneurship in US Job Creation and Economic Dynamism.”Journal of Economic Perspectives.https://www.aeaweb.org/articles