Suchergebnisse

A pioneering account of the surging global tide of market power-and how it stifles workers around the worldIn an era of technological progress and easy communication, it might seem reasonable to assume that the world's working people have never had it so good. But wages are stagnant and prices are rising, so that everything from a bottle of beer to a prosthetic hip costs more. Economist Jan Eeckhout shows how this is due to a small number of companies exploiting an unbridled rise in market power-the ability to set prices higher than they could in a properly functioning competitive marketplace. Drawing on his own groundbreaking research and telling the stories of common workers throughout, he demonstrates how market power has suffocated the world of work, and how, without better mechanisms to ensure competition, it could lead to disastrous market corrections and political turmoil.The Profit Paradox describes how, over the past forty years, a handful of companies have reaped most of the rewards of technological advancements-acquiring rivals, securing huge profits, and creating brutally unequal outcomes for workers. Instead of passing on the benefits of better technologies to consumers through lower prices, these "superstar" companies leverage new technologies to charge even higher prices. The consequences are already immense, from unnecessarily high prices for virtually everything, to fewer startups that can compete, to rising inequality and stagnating wages for most workers, to severely limited social mobility.A provocative investigation into how market power hurts average working people, The Profit Paradox also offers concrete solutions for fixing the problem and restoring a healthy economy

We propose a theory of skill mobility across cities. It predicts the well documented city size-wage premium: the wage distribution in large cities first-order stochastically dominates that in small cities. Yet, because this premium is reflected in higher house prices, this does not necessarily imply that this stochastic dominance relation also exists in the distribution of skills. Instead, we find there is second-order stochastic dominance in the skill distribution. The demand for skills is non-monotonic as our model predicts a "Sinatra" as well as an "Eminem" effect: both the very high and the very low skilled disproportionately sort into the biggest cities, while those with medium skill levels sort into small cities. The pattern of spatial sorting is explained by a technology with a varying elasticity of substitution that is decreasing in skill density. Using CPS data on wages and Census data on house prices, we find that this technology is consistent with the observed patterns of skills.

"The rise in world trade since 1970 has raised international mobility of labor services. We study the effect of such a globalization of the world's labor markets. We find that when people can choose between wage work and managerial work, the output gains are U-shaped: A worldwide labor market raises output by more in the rich and the poor countries, and by less in the middle-income countries. This is because the middle-income countries experience the smallest change in the factor-price ratio, and where the option to choose between wage work and managerial work has the least value in the integrated economy. Our theory also establishes that after economic integration, the high skill countries see a disproportionate increase in managerial occupations. Using aggregate data on GDP, openness and occupations from 115 countries, we find evidence for these patterns of occupational choice"--National Bureau of Economic Research web site

This reply refutes the objection raised by Levy (2009) about the fit of the upper tail of the city size distribution in Eeckhout (2004). I show that the method on which his conclusion is based is unsubstantiated. The visual interpretation of the fit on log-log plots is misleading. In addition, the methodology used to estimate a truncated subsample of the distribution while testing its significance against a distribution with prespecified parameters is ill-founded. The main conclusion is that Gibrat's law holds: city sizes follow proportionate growth, thus giving rise to a lognormal size distribution, tail included. (JEL R11, R12, R23)

Two empirical regularities concerning the size distribution of cities have repeatedly been established: Zipf's law holds (the upper tail is Pareto), and city growth is proportionate. Census 2000 data are used covering the entire size distribution, not just the upper tail. The nontruncated distribution is shown to be lognormal, rather than Pareto. This provides a simple justification for the coexistence of proportionate growth and the resulting lognormal distribution. An equilibrium theory of local externalities that can explain the empirical size distribution of cities is proposed. The driving force is a random productivity process of local economies and the perfect mobility of workers.

Within a microeconomic framework, educational mobility and inequality are studied. The labour market is characterized by imperfectly substitutable skills and production occurs in monopolistically competitive industries that exhibit local non‐convexities. Education allows for upward mobility. It is shown that multiple mobility equilibria exist in the stage game. In addition, for some skill levels, Pareto improvements are possible through adjustment policies. In the repeated game, a sufficient condition is derived for polarization, in which case the economy exhibits a low growth path. A higher growth path can be achieved through intertemporal redistribution. Without adjustment, inequality will increase continuously.

Because of sorting, more skilled workers are more productive in higher‐type firms. They also learn at different rates about their productivity and therefore expect different wage paths across firms. We show that under strict supermodularity, there is always positive assortative matching: differential learning is always dominated by the impact of productivity. Surprisingly, this holds even if learning is faster in the low‐type firm. The key assumption driving this result is that this is a pure Bayesian learning model. The model provides realistic predictions about wage variance, turnover and the wage distribution that are in line with recent work that estimates the value of learning from co‐workers.

We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise revenue and is constrained by free mobility of labor across cities does not choose equal taxes for cities of different sizes. The optimal tax schedule is location specific and tax differences between large and small cities depend on the level of government spending and on the concentration of housing wealth. Our estimates for the US imply higher marginal rates in big cities, but lower than what is observed. Simulating the US economy under the optimal tax schedule, there are large effects on population mobility: the fraction of population in the 5 largest cities grows by 8.0% with 3.5% of the country-wide population moving to bigger cities. The welfare gains however are smaller. Aggregate consumption goes up by 1.53%. This is due to the fact that much of the output gains are spent on the increased costs of housing construction in bigger cities. Aggregate housing consumption goes down by 1.75%.

We develop a dynamic model with knowledge spillovers in production. The model contains two opposing forces. Imitation of other firms helps followers catch up with leaders, but the prospect of doing so makes followers want to free ride. The second force dominates and creates permanent inequality. We show that the greater are the average spillovers and the easier they are to obtain, the greater is the free-riding and inequality. More directed copying raises inequality by raising the free-riding advantages of hanging back. Using Compustat and patent-citation data we find that copying is highly undirected.

The labor market by itself can create cyclical outcomes, even in the absence of exogenous shocks. We propose a theory in which the search behavior of the employed has profound aggregate implications for the unemployed. There is a strategic complementarity between active on-the-job search and vacancy posting by firms, which leads to multiple equilibria: in the presence of sorting, active on-the-job search improves the quality of the pool of searchers. This encourages vacancy posting, which in turn makes costly on-the-job search more attractive—a self-fulfilling equilibrium. The model provides a rationale for the Jobless Recovery, the outward shift of the Beveridge curve during the boom and for pro-cyclical frictional wage dispersion. Central to the model's mechanism is the fact that the employed crowd out the unemployed when on-the-job search picks up during recovery. We also illustrate this mechanism in a stylized calibration exercise. ; Eeckhout gratefully acknowledges support from the ERC, Grant 339186, from RecerCaixa 2013, and from the Spanish Government, Grant ECO2015-67655-P.