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Lecture 2/ Is inequality necessary?, Lecture 3/Economic inequality pt1,…

- - - - criticism: hard to define
    - - difficult to define functionally important jobs
      - mismatch between functional importance and need for specialized training
      - observed economic inequality exceeds expected that would be necessary to incentivize training
      - high-wage jobs are pleasant in other ways
      - large differences in amount of inequality across countries w/ similar jobs
      - Theory predicts positive correlation between inequality and GDP growth
        
        correlatioin is actually negative
        
        Theory predicts that reducing tax rates on rich would increase rate of GDP
        
        no clear correlation
      - Inequality may be dysfunctional
- - - - What are some patterns of pre-tax income?
        
        U-shaped pattern for pre-tax income of the top 1%
        
        share of bottom 50% has dipped while top 10% has increased
    - - top 10% lose share of national wealth while bottom 50% gain more shares
- - - - r = rate of return on capital
      - g = rate of growth in the economy
    - - When r > g
      - What are some effects of this?
        
        population growth slows, productively growth slows
    - - abandon capitalism
      - Global wars
      - Global progressive tax
  - - - raise labor supply leading to decreasing wages
      - Raise demand for certain types of jobs
        
        immigrants increase jobs by 1.2/person
      - Increase profits of business owners
  - - - raise demand for more educated and skilled workers
      - college wage premium has increased
    - - No, if supply keeps up with demand
  - - - growth in pretax income has increased
    - - open market for CEOs
      - competition for talented CEOs
  - - - Hacker & Pierson
    - - decline in top tax rates
      - Labor policies favor businesses
      - Stock options used instead
      - What are the key arguments:
        
        rules of market that determine pay are set through politics
        
        politics captured by wealthy
  - - - Weeden & Grusky
    - - wages and pre-tax income across all distributions
    - - institutions and laws protect some workers and capital owners from competition
      - increased economic inequality from disproportionate protections
        Low pay workers: less protections
        high pay workers; More protection
      - What is a rent?
        
        payments on asset above what is necessary to keep that asset in production under perfect competition
        
        What types of rent are there?
        
        contract rent: rent on a property
        
        capial rent: rent on businesses
        
        labor rent: from asset of scarce skills
        
        reservation rate: lowest wages a worker would accept before leaving labor force
        
        observed wage = reservation wage + labor rent
        
        Where do labor rents come from?
        
        barriers to education
        
        creates shortage of labor supply
        
        What are the bottom and top end rents?
        
        Bottom ennd rents: raise wages with workers with fewer labor assets
        
        Top end rents: raise wages of workers with more labor assets
  - - - Unions: decline of union participation
      - minimum wage: decline in real value of federal minimum wage
    - - Why as capital's share increased
        
        deunionization: balance shifted
        
        globalization- capital can move, not workers
        
        growing industry concentration- anti-trust enforcement weekend