Kaldor and Piketty’s facts: The rise of monopoly power in the United States

Gauti Eggertsson, Jacob A. Robbins and Ella Getz Wold

Journal of Monetary Economics, 2021, vol. 124, issue S, S19-S38

Abstract: The macroeconomic data of the last fifty years have 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 average returns 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—that is, 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.

Keywords: Monopoly power; Secular stagnation; Labor share; Tobin’s Q (search for similar items in EconPapers)
JEL-codes: D42 E21 E22 E43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Related works:
Working Paper: Kaldor and Piketty’s Facts: The Rise of Monopoly Power in the United States (2018)
Working Paper: Kaldor and Piketty's Facts: the Rise of Monopoly Power in the United States (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:124:y:2021:i:s:p:s19-s38

DOI: 10.1016/j.jmoneco.2021.09.007

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