Kaldor and Piketty’s Facts: The Rise of Monopoly Power in the United States

Gauti Eggertsson, Jacob Robbins and Ella Getz Wold

No 24287, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The macroeconomic data of the last thirty years has overturned at least two of Kaldor’s famous stylized growth facts: constant interest rates, and a constant labor share. At the same time, the research of Piketty and others has introduced several new and surprising facts: an increase in the financial wealth-to-output ratio in the US, an increase in measured Tobin’s Q, and a divergence between the marginal and the average return on capital. In this paper, we argue that these trends can be explained by an increase in market power and pure profits in the US economy, i.e., the emergence of a non-zero-rent economy, along with forces that have led to a persistent long term decline in real interest rates. We make three parsimonious modifications to the standard neoclassical model to explain these trends. Using recent estimates of the increase in markups and the decrease in real interest rates, we show that our model can quantitatively match these new stylized macroeconomic facts.

JEL-codes: E3 E5 E6 O4 (search for similar items in EconPapers)
Date: 2018-02
New Economics Papers: this item is included in nep-dge, nep-his, nep-hme, nep-hpe, nep-mac and nep-pke
Note: ME
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Citations: View citations in EconPapers (111)

Published as Gauti B. Eggertsson & Jacob A. Robbins & Ella Getz Wold, 2021. "Kaldor and Piketty’s facts: The rise of monopoly power in the United States," Journal of Monetary Economics, .

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Journal Article: Kaldor and Piketty’s facts: The rise of monopoly power in the United States (2021)
Working Paper: Kaldor and Piketty's Facts: the Rise of Monopoly Power in the United States (2018)
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