Increasing Market Concentration – Update October 2020

Increasung Market Concentration – Update October 2020

In this post I have compiled several newly published papers books and articles on the subject of Increasing market concentration. Mainly in 2019 and 2020.

Books
  • The Curse of Bigness
  • The Myth of Capitalism
Several new reserach papers were published by
  • Cato Institute
  • Brookings Institution
  • Federal Reserve

Reports

Rational decision making by the firms

  • Organic Growth – Use business investments to grow business – During growth phase of the firm and the industry
  • Inorganic Growth – Use Mergers and Acquisitions to grow – During mature phase and Declining Markets due to Technological Changes
  • Casacading effects
    • Leaders merge
    • Laggards merge
    • Suppliers merge
  • Micro Motives and Macro Behavior
  • What is good for a firm, May not be good for economy

Key Terms

  • Shareholder Capitalism
  • Market Concentration
  • Industry Concentration
  • Horizontal Merger
  • Verical Merger
  • Mergers and Acquisition
  • Competition Policy
  • Profits and Profitability
  • Corporate Finance
  • Anti Trust Laws
  • Industry Consolidation
  • Capitalism
  • Market Share
  • Competitive Dynamics
  • Organic Growth
  • Inorganic Growth
  • Business Investments
  • Macro Growth
  • Market Maturity
  • Product Life Cycles
  • Technological Changes
  • Wealth and Income Inequality
  • Monopoly
  • Oligopoly
  • Cross Border Mergers
  • Innovation based Mergers in Technology
  • HHI

My Related Posts

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Rising Profits, Rising Inequality, and Rising Industry Concentration in the USA

Competition, Concentration, and Anti-Trust Laws in the USA

Concentration, Investment, and Growth

Increasing Market Concentration in USA: Update April 2019

Mergers and Acquisitions – Long Term Trends and Waves

The Decline in Long Term Real Interest Rates

Low Interest Rates and Business Investments : Update August 2017

Business Investments and Low Interest Rates

Why do Firms buyback their Shares? Causes and Consequences.

Cash and Investments: Corporate Savings Glut in USA

Key sources of Research

What if Rising Concentration were an Indication of More Cimpetition, not Less?

Causes, Consequences, and Policy Responses to Market Concentration

The Rise of Corporate Market Power

Market Concentration Is Threatening the U.S. Economy

The United States’s low-growth/high-inequality problem is due to too few firms holding too much power.CHAZEN GLOBAL INSIGHTSJoseph E. Stiglitz March 12, 2019 

https://www8.gsb.columbia.edu/articles/chazen-global-insights/market-concentration-threatening-us-economy

Increasing market concentration in Europe is more likely to be a sign of strength than a cause for concern 

Tommaso Bighelli, Filippo di Mauro, Marc Melitz, Matthias Mertens  13 October 2020

https://voxeu.org/article/increasing-market-concentration-europe-more-likely-be-sign-strength-cause-concern

The Economics and Politics of Market Concentration

Thomas Philippon

https://www.nber.org/reporter/2019number4/economics-and-politics-market-concentration

The Great Consolidation:
Industry and Equity Market Concentration after the Crisis

Top 5 Highly Concentrated Manufacturing Industries

by Marisa Lifschutz, Senior Analyst – Team Lead 
May 02 2019 

https://www.ibisworld.com/industry-insider/analyst-insights/top-5-highly-concentrated-manufacturing-industries/

How Market Power has Increased US Inequality

Are Markets Becoming Less Competitive?

Federal Reserve of Richmond

2019

https://www.richmondfed.org/publications/research/economic_brief/2019/eb_19-06/

Trends in Financial Market Concentration and Their Implications for Market Stability

Is Rising Concentration Hampering Productivity Growth?

Peter J. Klenow, Huiyu Li, and Theodore Naff

Rising Bank Concentration

Dean CorbaeUniversity of Wisconsin – Madison and NBER

Pablo D’Erasmo

Federal Reserve Bank of Philadelphia

https://www.minneapolisfed.org/research/staff-reports/rising-bank-concentration

Are Markets Too Concentrated?

Industries are increasingly concentrated in the hands of fewer firms. But is that a bad thing?Article by: Tim Sablik

Richmond Federal Reserve

https://www.richmondfed.com/publications/research/econ_focus/2018/q1/cover_story

Have Acquisitions of Failed Banks Increased the Concentration of U.S. Banking Markets? 

By Wheelock, David C.

https://www.questia.com/library/journal/1G1-257675083/have-acquisitions-of-failed-banks-increased-the-concentration

Large Banks Improve Competition and Consumer Choice in Local Markets

Sean Campbell•20 May 2019•

https://www.fsforum.com/types/press/blog/large-banks-improve-competition-consumer-choice/

Low Interest Rates Don’t Drive Market Concentration

A critical assessment of Atif Mian, Amir Sufi and Ernest Liu’s paper 

https://nathantankus.substack.com/p/low-interest-rates-dont-drive-market

Market Power and Monetary Policy

Speech given by

Andrew G Haldane Chief Economist Bank of England

Competition and Productivity: A Review of Evidence

Thomas J. Holmes

University of Minnesota,
Federal Reserve Bank of Minneapolis,
and National Bureau of Economic Research

James A. Schmitz, Jr.
Federal Reserve Bank of Minneapolis

2010

Understanding market concentration: internet-based applications from the banking industry

Abstract

Fred H. Hays
University of Missouri-Kansas City

Sidne Gail Ward University of Missouri-Kansas City

Concentration, market power and dynamism in the euro area

Monopoly Myths: Are Markets Becoming More Concentrated?

Joe Kennedy 

June 29, 2020

https://itif.org/publications/2020/06/29/monopoly-myths-are-markets-becoming-more-concentrated

BENEFITS OF COMPETITION AND INDICATORS

2016

Council of Economic Advisors

Obama whitehouse

Why Is the Stock Market So Strong When the Economy Is Weak?

The Myth of Capitalism: Monopolies and the Death of Competition

Jonathan TepperDenise Hearn (With)

ISBN: 978-1-119-54819-5 November 2018 320 Pages

https://www.wiley.com/en-us/The+Myth+of+Capitalism%3A+Monopolies+and+the+Death+of+Competition-p-9781119548195

Number of Banks in USA

https://fred.stlouisfed.org/series/USNUM

Number of Listed Companies in USA

https://fred.stlouisfed.org/series/DDOM01USA644NWDB

Long-Term Government Bond Yields: 10-year: Main (Including Benchmark) for the United States 

https://fred.stlouisfed.org/series/IRLTLT01USM156N

Mergers and Acquisitions Data for USA and Worldwide

http://www.imaa-institute.org

Market Power, Inequality, and Financial Instability

Isabel Cair ́o and Jae Sim 

2020-057

What Happened to U.S. Business Dynamism?1

Ufuk Akcigit and Sina T. Ates

https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-to-us-business-dynamism-20200214.htm

Untangling the Complex Causes of Inequality

December 4, 2018

https://www.frbatlanta.org/economy-matters/economic-research/2018/12/04/untangling-the-complex-causes-of-income-wealth-and-opportunity-inequality

Capitalism is not the source of our economic struggles

The real culprit is less obvious but can be remedied

Increased corporate concentration and the influence of market power

The New Economic Concentration

The competition that justifies capitalism is being destroyed—by capitalists.

BY DAVID DAYEN

JANUARY 16, 2019

https://prospect.org/power/new-economic-concentration/

SUPPLEMENTAL NOTES ON MARKET CONCENTRATION AND MARKET POWER

By
Dennis L. Weisman

The Curse of Bigness
Antitrust in the New Gilded Age

The Curse of Bigness by Tim Wu

Low Interest Rates and Bank’s Profitability – Update May 2019

Low Interest Rates and Bank’s Profitability – Update May 2019

My last post on this important topic was in 2017.  Since then several new articles and research papers have been published. I have compiled them in this post.  Please see references.

In my posts I have shown how many trends in economics for the last thirty years can be explained by unintendend consequences of US Federal Researve monetary policy of lowering interest rates to boost economic growth.

  • Rise of Shadow Banking – MMMF
  • Rise of International capital flows in USA
  • Growth of Consumer credit – Credit Cards and Housing Loans
  • Decline in Net Interest Margins of the Banks
  • Risk taking by banks to maintain and increase their profits
  • Rise of Non interest income of Banks
  • Rise of Non core business of banks
  • Rise of Mergers/Acquisitions/Consolidation in Banking sector

Related to these are:

  • Business Investments by Production side of economy
  • Increase in Market concentration of Products
  • Increase in Mergers and Acquisitions/consolidation among Product market businesses
  • Decreasing monitory policy effectiveness
  • Wrong economic growth forecasts
  • Secular Stagnation Hypothesis
  • Rise of Outsourcing and global value chains
  • Free Trade agreements
  • Increase in Ineqality of wealth and Income
  • Increase in corporate profits and equities market
  • Increase in corporate savings
  • Increase in share buybacks, and dividends payouts

 

 

and this one,

Increasing Market Concentration in USA: Update April 2019

Key Sources of Research:

Monetary policy and bank profitability in a low interest rate environment

Click to access ecb-wp2105.en.pdf

The “Reversal Interest Rate”: An Effective Lower Bound on Monetary Policy∗

Markus K. Brunnermeier and Yann Koby

This version: May 3, 2017

Click to access 16f_reversalrate.pdf

Click to access 26d_rir_bankofcanada.pdf

Interest Rate and Its Effect on Bank’s Profitability

Muhammad Faizan Malik1,2, Shehzad Khan1,2, Muhammad Ibrahim Khan1, Faisal Khan

https://www.researchgate.net/publication/318648785_Interest_Rate_and_Its_Effect_on_Bank’s_Profitability

Bank performance under negative interest rates

VOXEU

https://voxeu.org/article/bank-performance-under-negative-interest-rates

How low interest rates impact bank

BBVA

https://www.bbva.com/en/how-low-interest-rates-impact-bank-profitability/

Negative-nominal-interest-rates-and-banking

Money and Banking

https://www.moneyandbanking.com/commentary/2018/10/21/negative-nominal-interest-rates-and-banking

Monetary policy and bank equity values in a time of low interest rates

Miguel Ampudia, Skander Van den Heuvel

 

Click to access ecb.wp2199.en.pdf

 

Bank Profitability and Financial Stability

Prepared by TengTeng Xu, Kun Hu, and Udaibir S. Das1

IMF

January 2019

 

https://www.imf.org/~/media/Files/Publications/WP/2019/wp1905.ashx

 

Financial stability implications of a prolonged period of low interest rates

Report submitted by a Working Group established by the Committee on the Global Financial System

The Group was co-chaired by Ulrich Bindseil (European Central Bank) and Steven B Kamin (Board of Governors of the Federal Reserve System)

July 2018

 

Click to access cgfs61.pdf

 

Monetary policy and bank profitability in a low interest rate environment

Carlo Altavilla Miguel Boucinha José-Luis Peydró
Economic Policy, Volume 33, Issue 96, October 2018, Pages 531–586,
Published: 09 October 2018

 

https://academic.oup.com/economicpolicy/article/33/96/531/5124289

 

 

Determinants of bank profitability in emerging markets

by E. Kohlscheen, A. Murcia and J. Contreras

Monetary and Economic Department

January 2018

BIS

Click to access work686.pdf

 

 

 

The Risk-Taking Channel of Monetary Policy Transmission in the Euro Area

 

Matthias Neuenkirch, Matthias Nöckel

4/2018

 

Click to access cesifo1_wp6982.pdf

 

 

 

 

ADAPTING LENDING POLICIES WHEN NEGATIVE INTEREST RATES HIT BANKS’ PROFITS

Óscar Arce, Miguel García-Posada, Sergio Mayordomo and Steven Ongena

2018

Click to access dt1832e.pdf

 

 

Banks, Money and the Zero Lower Bound

Michael Kumhof

Xuan Wang

Click to access 2018-16.pdf

 

 

 

Banking in a Steady State of Low Growth and Interest Rates

by Qianying Chen, Mitsuru Katagiri, and Jay Surti

IMF

https://www.imf.org/~/media/Files/Publications/WP/2018/wp18192.ashx

 

 

 

Changes in Monetary Policy and Banks’ Net Interest Margins: A Comparison across Four Tightening Episodes

Jared Berry, Felicia Ionescu, Robert Kurtzman, and Rebecca Zarutskie

Federal Reserve

2019

https://www.federalreserve.gov/econres/notes/feds-notes/changes-in-monetary-policy-and-banks-net-interest-margins-a-comparison-20190419.htm

 

 

 

Monetary Policy and Bank Profitability, 1870 – 2015

47 Pages Posted: 8 Feb 2019

Kaspar Zimmermann

University of Bonn

Date Written: January 25, 2019

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3322331

 

 

The effect of falling interest rates and yield curve to banks’ interest margin and profitability: cross-country evidence from the EU banks in the aftermath of 2008 financial crisis

Giorgi Chagoshvili

MS Thesis

 

https://repository.ihu.edu.gr/xmlui/bitstream/handle/11544/29306/The%20effect%20of%20falling%20interest%20rates%20and%20yield%20curve%20to%20banks%20%20interest%20margin%20and%20profitability%20cross%20country%20evidence%20from%20the%20EU%20banks%20in%20the%20aftermath%20of%202008%20financial%20crisis.pdf?sequence=1

 

 

 

 

Bank Performance under Negative Interest Rates

 

by Jose A. Lopez, Andrew K. Rose, and Mark M. Spiegel

 

Click to access VOXNNIR.pdf

Determinants of bank’s interest margin in the aftermath of the crisis: the effect of interest rates and the yield curve slope

  • Paula Cruz-García
  • Juan Fernández de GuevaraEmail author
  • Joaquín Maudos

https://link.springer.com/article/10.1007/s00181-017-1360-0

 

 

 

 

Key Determinants of Net Interest Margin of Banks in the EU and the US

MS Thesis

Charles University

Bc. Petr Hanzlík

 

https://dspace.cuni.cz/bitstream/handle/20.500.11956/99546/120297262.pdf?sequence=1

 

Increasing Market Concentration in USA: Update April 2019

Increasing Market Concentration in USA: Update April 2019

In this post, I have compiled recent articles and papers on the issues of:

  • Increased Market Power
  • Increased Market Concentration
  • Increased Corporate Profits
  • Increased Inequality
  • Anti Trust Laws and Competition policy
  • Interest rates and Business Investments
  • Interest rates and Mergers and Acquisitions
  • Stock Buybacks, Dividends, and Business Investments
  • Outsourcing, and Global Value Chains
  • Corporate Savings Glut
  • Slower Economic Growth
  • Reduced Dynamism

 

From Low Interest Rates, Market Power, and Productivity Growth

How does the production side of the economy respond to a low interest rate environment? This study provides a new theoretical result that low interest rates encourage market concentration by giving industry leaders a strategic advantage over followers, and this effect strengthens as the interest rate approaches zero. The model provides a unified explanation for why the fall in long-term interest rates has been associated with rising market concentration, reduced dynamism, a widening productivity-gap between industry leaders and followers, and slower productivity growth. Support for the model’s key mechanism is established by showing that a decline in the ten year Treasury yield generates positive excess returns for industry leaders, and the magnitude of the excess returns rises as the Treasury yield approaches zero.

Please see my related posts:

 

Competition, Concentration, and Anti-Trust Laws in the USA

Concentration, Investment, and Growth

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Rising Profits, Rising Inequality, and Rising Industry Concentration in the USA

Why are Macro-economic Growth Forecasts so wrong?

Low Interest Rates and Business Investments : Update August 2017

Mergers and Acquisitions – Long Term Trends and Waves

Business Investments and Low Interest Rates

Economic Growth Theories – Orthodox and Heterodox

The Decline in Long Term Real Interest Rates

Why do Firms buyback their Shares? Causes and Consequences.

On Inequality of Wealth and Income – Causes and Consequences

Intra Industry Trade and International Production and Distribution Networks

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

Understanding Trade in Intermediate Goods

Trends in Intra Firm Trade of USA

Cash and Investments: Corporate Savings Glut in USA

Key sources:

Markups, Consumption and Market Concentration

American Economic Association

https://www.aeaweb.org/conference/2019/preliminary/814?q=eNqrVipOLS7OzM8LqSxIVbKqhnGVrJQMlWp1lBKLi_OTgRwlHaWS1KJcXAgrJbESKpSZmwphlWWmloO0FxUUgLQagFwwSH9BYjpIBZANXDDjnB7P

AMERICA’S CONCENTRATION CRISIS

AN OPEN MARKETS INSTITUTE REPORT

https://concentrationcrisis.openmarketsinstitute.org

How Low Interest Rates Have Led To Increased Market Concentration

Seeking Alpha

March, 2019

https://seekingalpha.com/article/4245601-low-interest-rates-led-increased-market-concentration

 

Market Concentration Is Threatening the US Economy

https://www.project-syndicate.org/commentary/united-states-economy-rising-market-power-by-joseph-e-stiglitz-2019-03

Concentration increasing?

John Cochrane

2019

https://johnhcochrane.blogspot.com/2019/03/concentration-increasing.html

Industry Concentration in Europe and North America

OECD

2019

Monopolies are the ‘missing piece of the puzzle’ when it comes to analyzing US inequality, investment researchers argue

Barclays Launches New Research Study Analyzing how Market Concentration is Affecting the US Economy

March 26, 2019

DISRUPTION CONCENTRATION AND THE NEW ECONOMY

The Surprising Thing About Market Concentration

by esteban rossi-hansberg, pierre-daniel sarte and nicholas trachter

 

Increased market power: a global problem that needs solving?

January 2019

https://www.oxera.com/agenda/increased-market-power-a-global-problem-that-needs-solving/

Click to access Increased-market-power.pdf

 

 

 

70 Years of US Corporate Profits∗

Simcha Barkai

Seth G. Benzell

April 2018

 

Click to access 2270yearsofuscorporateprofits.pdf

 

 

Low Interest Rates, Market Power, and Productivity Growth

Ernest Liu, Atif Mian, Amir Sufi

January 2019

NBER

https://www.nber.org/papers/w25505

Click to access BFI-MFRI-2019-09.pdf

Chapter 2: The Rise of Corporate Market Power and Its Macroeconomic Effects

World Economic Outlook

April 2019

IMF

https://www.imf.org/en/Publications/WEO/Issues/2019/03/28/world-economic-outlook-april-2019

Outsourcing, Occupational and Industrial Concentration

Nicholas Bloom (Stanford), Audrey Guo (Stanford) and Brian Lucking (Stanford)
November 2018

 

 

 

Diverging Trends in National and Local Concentration∗

Esteban Rossi-Hansberg Pierre-Daniel Sarte

Nicholas Trachter

February 26, 2019

 

Click to access DTNLC.pdf

 

 

 

Macroeconomics and Market Power: Facts, Potential Explanations, and Open Questions

Chad Syverson

January 2019

Brookings

 

Click to access ES_20190116_Syverson-Macro-Micro-Market-Power.pdf

A Theory of Falling Growth and Rising Rents

Author(s): Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, and Huiyu Li

March 2019

Fed Reserve San Francisco

https://www.frbsf.org/economic-research/publications/working-papers/2019/11/

Competition and market concentration in the United States

 

December 2018

https://www.tresor.economie.gouv.fr/Articles/bd779c20-ede1-4266-94ee-13eb70d0b882/files/c19bc114-e2ee-4f2e-99a4-6ca645b6f0d5

Concentration, Market Power and Dynamism in the Euro Area

ECB Working Paper No. 2253 (2019); ISBN 978-92-899-3515-9

 

Posted: 26 Mar 2019

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3360233&download=yes

The Rise of Market Power and the Macroeconomic Implications

Jan De Loecker
Jan Eeckhout
Gabriel Unger
November 22, 2018

 

Click to access RMP.pdf

 

Competition, Concentration, and Anti-Trust Laws in the USA

Competition, Concentration, and Anti-Trust Laws in the USA

 

Currently the US FTC has been having hearings on concentration, competition, and anti-trust laws in the USA.  Several conferences are organized starting with September 2018.  I present links to hearings details and videos of the sessions.  As of now, two hearings have already taken place.  I have given the links to the third hearing below.  Economists Joe Stiglitz and Jason Furman have given speeches and presentations during first and second hearings.

Key Sources of Research:

Hearings on Competition and Consumer Protection in the 21st Century

Hearings on Competition and Consumer Protection in the 21st Century

The Federal Trade Commission will hold a series of public hearings during the fall and winter 2018 examining whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection law, enforcement priorities, and policy. The PDF version of this content includes footnotes and sources. All the hearings will be webcast live.

 

https://www.ftc.gov/policy/hearings-competition-consumer-protection

Click to access hearings-announcement_0.pdf

 

 

Hearings on Competition and Consumer Protection in the 21st Century: Opening Session

September 14, 2018

DAVIS POLK

 

Click to access 2018-09-14_hearings_on_competition_consumer_protection_in_21st_century.pdf

 

 

FTC Hearing #1: Competition and Consumer Protection in the 21st Century

Hearing #1 On Competition and Consumer Protection in the 21st Century, September 13-14, 2018

 

https://www.ftc.gov/news-events/events-calendar/2018/09/ftc-hearing-1-competition-consumer-protection-21st-century

Click to access agenda-hearings-georgetown_3.pdf

https://www.ftc.gov/news-events/audio-video/video/competition-consumer-protection-21st-century-welcome-session-1

https://www.ftc.gov/news-events/audio-video/video/competition-consumer-protection-21st-century-welcome-session-2

https://www.ftc.gov/news-events/audio-video/video/competition-consumer-protection-21st-century-welcome-session-3

 

 

 

 

FTC Hearing #2: Competition and Consumer Protection in the 21st Century

FTC Hearing #2: Competition and Consumer Protection in the 21st Century

 

https://www.ftc.gov/news-events/press-releases/2018/09/ftc-announces-second-session-hearings-competition-consumer

Click to access hearings-agenda-cc-sept_0.pdf

https://www.ftc.gov/news-events/audio-video/video/ftc-hearing-2-competition-consumer-protection-21st-century-state-us-0

https://www.ftc.gov/news-events/audio-video/video/ftc-hearing-2-competition-consumer-protection-21st-century-state-us

https://www.ftc.gov/news-events/audio-video/video/ftc-hearing-2-competition-consumer-protection-21st-century-monopsony

 

FTC Hearing #3: Competition and Consumer Protection in the 21st Century

FTC Hearing #3: Competition and Consumer Protection in the 21st Century - George Mason University

 

https://www.ftc.gov/news-events/events-calendar/2018/10/ftc-hearing-3-competition-consumer-protection-21st-century

 https://www.ftc.gov/system/files/documents/public_events/1413712/hearings-agenda-gmu_5.pdf

THE UNITED STATES HAS A MARKET CONCENTRATION PROBLEM

REVIEWING CONCENTRATION ESTIMATES IN ANTITRUST MARKETS, 2000-PRESENT

 

ISSUE BRIEF BY ADIL ABDELA AND MARSHALL STEINBAUM

SEPTEMBER 2018

 

Click to access ftc-2018-0074-d-0042-155544.pdf

 

Nobel Prize-winning economist Joseph Stiglitz says the US has a major monopoly problem

https://www.businessinsider.com/joseph-stiglitz-says-the-us-has-a-major-monopoly-problem-2018-9

 

 

Competition Conference 2018

What’s the Evidence for Strengthening Competition Policy?

Boston University

http://sites.bu.edu/tpri/news-and-events/competition-conference-2018/

http://sites.bu.edu/tpri/competition-conference-2018-program-and-papers/

 

Slower Productivity and Higher Inequality: Are They Related?

Jason Furman and Peter Orszag

June 2018

 

Click to access wp18-4.pdf

 

 

 

Market Power and Monetary Policy

Speech given by

Andrew G Haldane Chief Economist Bank of England

Co-authors: Tommaso Aquilante, Shiv Chowla, Nikola Dacic, Riccardo Masolo, Patrick Schneider, Martin Seneca and Srdan Tatomir.

Federal Reserve Bank of Kansas City Economic Policy Symposium Jackson Hole, Wyoming

24 August 2018

 

https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/market-power-and-monetary-policy-speech-by-andy-haldane.pdf?la=en&hash=ECC7B63705847EC5E68DEFC86C56B887B9DBD0CD

Concentration, Investment, and Growth

Concentration, Investment, and Growth

 

Recent Economic Policy Symposium at Jackson Hole Wyoming (August 23-25) where economists, central bankers, policy makers gather together annually discussed issues of Rising Market Concentration, Declining Business Investments, and Declining Economic Dynamism.

2018 Economic Policy Symposium, Jackson Hole, Wyoming

https://www.kansascityfed.org/publications/research/escp/symposiums/escp-2018

 

 

Richmond Federal Reserve Bank published an article on Market Concentration.

Are Markets Too Concentrated?

Industries are increasingly concentrated in the hands of fewer firms. But is that a bad thing?

 

Click to access cover_story.pdf

Click to access full_issue.pdf

 

 

Washington Post published a story on market concentration in US companies.

Are U.S. Companies Too Big and Powerful? The Fed Wants to Know

https://www.washingtonpost.com/business/are-us-companies-too-big-and-powerful-the-fed-wants-to-know/2018/08/23/35891356-a6b0-11e8-ad6f-080770dcddc2_story.html?noredirect=on&utm_term=.9cb83dadde89

 

 

 

OECD held a joint conference with the World Bank and the IMF on Product Market Concentration, Inclusive Growth, and Regulation at OECD HQ, Paris, France. 11 June, 2018.

http://www.oecd.org/eco/reform/joint-imf-wb-oecd-conf-structural-reform-2018/

 

 

Please see my related posts

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

 

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

Shareholder Capitalism: Rising Market Concentration, Slower Productivity Growth, Rising Inequality, Rising Profits, and Rising Equities Markets

 

Public traded companies are always under pressure to show earnings growth and sales revenue growth to enhance shareholder value.

 

How do they do it when markets have matured and economy has slowed?

  • Lower Costs
  • Increase Market Share
  • Find New Markets
  • Diversify
  • Create New products and servicces

 

How do then companies lower their costs?

  • Vertical Mergers and Acquisitions
  • Outsourcing (Sourcing parts and components / Intermediate Goods / Inputs from cross border)
  • Offshoring (Shifting Production cross border)
  • Vertical Integration

 

How do then companies increase their market share?

  • Horizontal Mergers and Acquisitions
  • Cross Border Markets Share (Sales in other countries)

 

In the last thirty years, this is exactly what has happened in US economy.

Macro Trends of increase in Outsourcing/Offshoring, Increase in Market Concentration, Increase in Inequality, Increase in Corporate Profits, Rising Equity Prices, Slower Productivity Growth, Lower Interest Rates, Low Labor Share, and Capital Share.

Please see my other posts expanding on these issues.

Please note that these forces are continuing and trends will remain on current trajectory.

 

Key Terms:

  • Stakeholder vs Shareholder Capitalism
  • Short Termism
  • Slow Productivity Growth
  • Rising Market Concentration
  • Rising Profits
  • Rising Equities Market
  • Rising Inequality
  • Dupont Ratio Analysis
  • Financial Planning (Micro – Firm Level)
  • Economic Planning (Macro- Aggregate Level)
  • Quarterly Capitalism

 

From SHAREHOLDER CAPITALISM: A SYSTEM IN CRISIS

Our current, highly financialised, form of shareholder capitalism is not just failing to provide new capital for investment, it is actively undermining the ability of listed companies to reinvest their own profits. The stock market has become a vehicle for extracting value from companies, not for injecting it.

No wonder that Andy Haldane, Chief Economist of the Bank of England, recently suggested that shareholder capitalism is ‘eating itself.’1 Corporate governance has become dominated by the need to maximise short-term shareholder returns. At the same time, financial markets have grown more complex, highly intermediated, and similarly shorttermist, with shares increasingly seen as paper assets to be traded rather than long term investments in sound businesses.

This kind of trading is a zero-sum game with no new wealth, let alone social value, created. For one person to win, another must lose – and increasingly, the only real winners appear to be the army of financial intermediaries who control and perpetuate the merry-goround. There is nothing natural or inevitable about the shareholder-owned corporation as it currently exists. Like all economic institutions, it is a product of political and economic choices which can and should be remade if they no longer serve our economy, society, or environment.

Here’s the impact this shareholder model is currently having:
• Economy: Shareholder capitalism is holding back productive investment. Even the Chief Executive of BlackRock, the world’s largest asset manager, has admitted that pressure to keep the share price high means corporate leaders are ‘underinvesting in innovation, skilled workforces or essential capital expenditures.’ 2
• Society: Shareholder capitalism is driving inequality. There is growing evidence that attempts to align executive pay with shareholder value are largely responsible for the ballooning of salaries at the top. The prioritisation of shareholder interests has also contributed to a dramatic decline in UK wages relative to profits, helping to explain the failure of ordinary people’s living standards to rise in line with economic growth.
• Environment: Shareholder capitalism helps to drive environmental destruction. It does this by driving risky shortterm behaviour, such as fossil fuel extraction, which ignores long-term environmental risks.

The idea that shareholder capitalism is the most efficient way to mobilise large amounts of capital is no longer tenable.

We need both to create new models of companies, and implement new ways of organising investment that are fit for building an inclusive, equal, and sustainable economy.

Companies should be explicitly accountable to a mission and a set of interests beyond shareholder returns. Equally, investment must provide long-term capital for socially and environmentally useful projects, and damaging forms of speculation must be restricted.

For most people, our economy simply is not working, and the damaging aspects of shareholder capitalism are at least in part responsible. Reforming shareholder capitalism must not be dismissed as too difficult – the crisis is too urgent for that. We can take the first steps towards a better economic model right now. It’s time to act.

 

 

A Crash Course in Dupont Financial Ratio Analysis

 

  • What happens when economic growth slows ?
  • What happens when profit margins decline ?
  • What happens when Sales growth is limited ?
  • What does lead to Mergers and Acquisitions ?
  • What is the impact of Cost of Capital ?
  • What is EVA (Economic Value Added) ?
  • What is impact of Outsourcing/Offshoring on Financial Ratios ?
  • What is impact of Mergers and Acquisitions on Financial Ratios ?
  • What is impact of Stock Buy Backs on Financial Ratios ?
  • What is impact of Dividends on Financial Ratios ?
  • ROS (Return on Sales)
  • ROE (Return on Equities)
  • ROA (Return on Assets)
  • ROIC (Return on Invested Capital)
  • EVA (Economic Value Added)
  • MVA (Market Value Added)

From The DuPont Equation, ROE, ROA, and Growth

The DuPont Equation

The DuPont equation is an expression which breaks return on equity down into three parts: profit margin, asset turnover, and leverage.

Learning Objectives

Explain why splitting the return on equity calculation into its component parts may be helpful to an analyst

Key Takeaways

Key Points

  • By splitting ROE into three parts, companies can more easily understand changes in their returns on equity over time.
  • As profit margin increases, every sale will bring more money to a company’s bottom line, resulting in a higher overall return on equity.
  • As asset turnover increases, a company will generate more sales per asset owned, resulting in a higher overall return on equity.
  • Increased financial leverage will also lead to an increase in return on equity, since using more debt financing brings on higher interest payments, which are tax deductible.

Key Terms

  • competitive advantage: something that places a company or a person above the competition

The DuPont Equation

image

DuPont Model: A flow chart representation of the DuPont Model.

The DuPont equation is an expression which breaks return on equity down into three parts. The name comes from the DuPont Corporation, which created and implemented this formula into their business operations in the 1920s. This formula is known by many other names, including DuPont analysis, DuPont identity, the DuPont model, the DuPont method, or the strategic profit model.

The DuPont Equation: In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage.

Under DuPont analysis, return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage. By splitting ROE (return on equity) into three parts, companies can more easily understand changes in their ROE over time.

Components of the DuPont Equation: Profit Margin

Profit margin is a measure of profitability. It is an indicator of a company’s pricing strategies and how well the company controls costs. Profit margin is calculated by finding the net profit as a percentage of the total revenue. As one feature of the DuPont equation, if the profit margin of a company increases, every sale will bring more money to a company’s bottom line, resulting in a higher overall return on equity.

Components of the DuPont Equation: Asset Turnover

Asset turnover is a financial ratio that measures how efficiently a company uses its assets to generate sales revenue or sales income for the company. Companies with low profit margins tend to have high asset turnover, while those with high profit margins tend to have low asset turnover. Similar to profit margin, if asset turnover increases, a company will generate more sales per asset owned, once again resulting in a higher overall return on equity.

Components of the DuPont Equation: Financial Leverage

Financial leverage refers to the amount of debt that a company utilizes to finance its operations, as compared with the amount of equity that the company utilizes. As was the case with asset turnover and profit margin, Increased financial leverage will also lead to an increase in return on equity. This is because the increased use of debt as financing will cause a company to have higher interest payments, which are tax deductible. Because dividend payments are not tax deductible, maintaining a high proportion of debt in a company’s capital structure leads to a higher return on equity.

The DuPont Equation in Relation to Industries

The DuPont equation is less useful for some industries, that do not use certain concepts or for which the concepts are less meaningful. On the other hand, some industries may rely on a single factor of the DuPont equation more than others. Thus, the equation allows analysts to determine which of the factors is dominant in relation to a company’s return on equity. For example, certain types of high turnover industries, such as retail stores, may have very low profit margins on sales and relatively low financial leverage. In industries such as these, the measure of asset turnover is much more important.

High margin industries, on the other hand, such as fashion, may derive a substantial portion of their competitive advantage from selling at a higher margin. For high end fashion and other luxury brands, increasing sales without sacrificing margin may be critical. Finally, some industries, such as those in the financial sector, chiefly rely on high leverage to generate an acceptable return on equity. While a high level of leverage could be seen as too risky from some perspectives, DuPont analysis enables third parties to compare that leverage with other financial elements that can determine a company’s return on equity.

ROE and Potential Limitations

Return on equity measures the rate of return on the ownership interest of a business and is irrelevant if earnings are not reinvested or distributed.

Learning Objectives

Calculate a company’s return on equity

Key Takeaways

Key Points

  • Return on equity is an indication of how well a company uses investment funds to generate earnings growth.
  • Returns on equity between 15% and 20% are generally considered to be acceptable.
  • Return on equity is equal to net income (after preferred stock dividends but before common stock dividends) divided by total shareholder equity (excluding preferred shares ).
  • Stock prices are most strongly determined by earnings per share (EPS) as opposed to return on equity.

Key Terms

  • fundamental analysis: An analysis of a business with the goal of financial projections in terms of income statement, financial statements and health, management and competitive advantages, and competitors and markets.

Return On Equity

Return on equity (ROE) measures the rate of return on the ownership interest or shareholders’ equity of the common stock owners. It is a measure of a company’s efficiency at generating profits using the shareholders’ stake of equity in the business. In other words, return on equity is an indication of how well a company uses investment funds to generate earnings growth. It is also commonly used as a target for executive compensation, since ratios such as ROE tend to give management an incentive to perform better. Returns on equity between 15% and 20% are generally considered to be acceptable.

The Formula

Return on equity is equal to net income, after preferred stock dividends but before common stock dividends, divided by total shareholder equity and excluding preferred shares.

Return On Equity: ROE is equal to after-tax net income divided by total shareholder equity.

Expressed as a percentage, return on equity is best used to compare companies in the same industry. The decomposition of return on equity into its various factors presents various ratios useful to companies in fundamental analysis.

ROE Broken Down: This is an expression of return on equity decomposed into its various factors.

The practice of decomposing return on equity is sometimes referred to as the “DuPont System. ”

Potential Limitations of ROE

Just because a high return on equity is calculated does not mean that a company will see immediate benefits. Stock prices are most strongly determined by earnings per share (EPS) as opposed to return on equity. Earnings per share is the amount of earnings per each outstanding share of a company’s stock. EPS is equal to profit divided by the weighted average of common shares.

Earnings Per Share: EPS is equal to profit divided by the weighted average of common shares.

The true benefit of a high return on equity comes from a company’s earnings being reinvested into the business or distributed as a dividend. In fact, return on equity is presumably irrelevant if earnings are not reinvested or distributed.

Assessing Internal Growth and Sustainability

Sustainable– as opposed to internal– growth gives a company a better idea of its growth rate while keeping in line with financial policy.

Learning Objectives

Calculate a company’s internal growth and sustainability ratios

Key Takeaways

Key Points

  • The internal growth rate is a formula for calculating the maximum growth rate a firm can achieve without resorting to external financing.
  • Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy.
  • Another measure of growth, the optimal growth rate, assesses sustainable growth from a total shareholder return creation and profitability perspective, independent of a given financial strategy.

Key Terms

  • retention: The act of retaining; something retained
  • retention ratio: retained earnings divided by net income
  • sustainable growth rate: the optimal growth from a financial perspective assuming a given strategy with clear defined financial frame conditions/ limitations

Internal Growth and Sustainability

The true benefit of a high return on equity arises when retained earnings are reinvested into the company’s operations. Such reinvestment should, in turn, lead to a high rate of growth for the company. The internal growth rate is a formula for calculating maximum growth rate that a firm can achieve without resorting to external financing. It’s essentially the growth that a firm can supply by reinvesting its earnings. This can be described as (retained earnings)/(total assets ), or conceptually as the total amount of internal capital available compared to the current size of the organization.

We find the internal growth rate by dividing net income by the amount of total assets (or finding return on assets ) and subtracting the rate of earnings retention. However, growth is not necessarily favorable. Expansion may strain managers’ capacity to monitor and handle the company’s operations. Therefore, a more commonly used measure is the sustainable growth rate.

Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy, such as target debt to equity ratio, target dividend payout ratio, target profit margin, or target ratio of total assets to net sales.

We find the sustainable growth rate by dividing net income by shareholder equity (or finding return on equity) and subtracting the rate of earnings retention. While the internal growth rate assumes no financing, the sustainable growth rate assumes you will make some use of outside financing that will be consistent with whatever financial policy being followed. In fact, in order to achieve a higher growth rate, the company would have to invest more equity capital, increase its financial leverage, or increase the target profit margin.

Optimal Growth Rate

Another measure of growth, the optimal growth rate, assesses sustainable growth from a total shareholder return creation and profitability perspective, independent of a given financial strategy. The concept of optimal growth rate was originally studied by Martin Handschuh, Hannes Lösch, and Björn Heyden. Their study was based on assessments on the performance of more than 3,500 stock-listed companies with an initial revenue of greater than 250 million Euro globally, across industries, over a period of 12 years from 1997 to 2009.

image

Revenue Growth and Profitability: ROA, ROS and ROE tend to rise with revenue growth to a certain extent.

Due to the span of time included in the study, the authors considered their findings to be, for the most part, independent of specific economic cycles. The study found that return on assets, return on sales and return on equity do in fact rise with increasing revenue growth of between 10% to 25%, and then fall with further increasing revenue growth rates. Furthermore, the authors attributed this profitability increase to the following facts:

  1. Companies with substantial profitability have the opportunity to invest more in additional growth, and
  2. Substantial growth may be a driver for additional profitability, whether by attracting high performing young professionals, providing motivation for current employees, attracting better business partners, or simply leading to more self-confidence.

However, according to the study, growth rates beyond the “profitability maximum” rate could bring about circumstances that reduce overall profitability because of the efforts necessary to handle additional growth (i.e., integrating new staff, controlling quality, etc).

Dividend Payments and Earnings Retention

The dividend payout and retention ratios offer insight into how much of a firm’s profit is distributed to shareholders versus retained.

Learning Objectives

Calculate a company’s dividend payout and retention ratios

Key Takeaways

Key Points

  • Many corporations retain a portion of their earnings and pay the remainder as a dividend.
  • Dividends are usually paid in the form of cash, store credits, or shares in the company.
  • Cash dividends are a form of investment income and are usually taxable to the recipient in the year that they are paid.
  • Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends.
  • Retained earnings can be expressed in the retention ratio.

Key Terms

  • stock split: To issue a higher number of new shares to replace old shares. This effectively increases the number of shares outstanding without changing the market capitalization of the company.

Dividend Payments and Earnings Retention

Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. On the other hand, retained earnings refers to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. Similarly, if the corporation takes a loss, then that loss is retained and called variously retained losses, accumulated losses or accumulated deficit. Retained earnings and losses are cumulative from year to year with losses offsetting earnings. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

A dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. Retained earnings are shown in the shareholder equity section in the company’s balance sheet –the same as its issued share capital.

Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a “special dividend” to distinguish it from the fixed schedule dividends. Dividends are usually paid in the form of cash, store credits (common among retail consumers’ cooperatives), or shares in the company (either newly created shares or existing shares bought in the market). Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder.

Cash dividends (most common) are those paid out in currency, usually via electronic funds transfer or a printed paper check. Such dividends are a form of investment income and are usually taxable to the recipient in the year they are paid. This is the most common method of sharing corporate profits with the shareholders of the company. For each share owned, a declared amount of money is distributed. Thus, if a person owns 100 shares and the cash dividend is $0.50 per share, the holder of the stock will be paid $50. Dividends paid are not classified as an expense but rather a deduction of retained earnings. Dividends paid do not show up on an income statement but do appear on the balance sheet.

image

Example Balance Sheet: Retained earnings can be found on the balance sheet, under the owners’ (or shareholders’) equity section.

Stock dividends are those paid out in the form of additional stock shares of the issuing corporation or another corporation (such as its subsidiary corporation). They are usually issued in proportion to shares owned (for example, for every 100 shares of stock owned, a 5% stock dividend will yield five extra shares). If the payment involves the issue of new shares, it is similar to a stock split in that it increases the total number of shares while lowering the price of each share without changing the market capitalization, or total value, of the shares held.

Dividend Payout and Retention Ratios

Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends:

The part of the earnings not paid to investors is left for investment to provide for future earnings growth. These retained earnings can be expressed in the retention ratio. Retention ratio can be found by subtracting the dividend payout ratio from one, or by dividing retained earnings by net income.

Dividend Payout Ratio: The dividend payout ratio is equal to dividend payments divided by net income for the same period.

Relationships between ROA, ROE, and Growth

Return on assets is a component of return on equity, both of which can be used to calculate a company’s rate of growth.

Learning Objectives

Discuss the different uses of the Return on Assets and Return on Assets ratios

Key Takeaways

Key Points

  • Return on equity measures the rate of return on the shareholders ‘ equity of common stockholders.
  • Return on assets shows how profitable a company’s assets are in generating revenue.
  • In other words, return on assets makes up two-thirds of the DuPont equation measuring return on equity.
  • Capital intensity is the term for the amount of fixed or real capital present in relation to other factors of production. Rising capital intensity pushes up the productivity of labor.

Key Terms

  • return on common stockholders’ equity: a fiscal year’s net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage
  • quantitatively: With respect to quantity rather than quality.

Return On Assets Versus Return On Equity

In review, return on equity measures the rate of return on the ownership interest (shareholders’ equity) of common stockholders. Therefore, it shows how well a company uses investment funds to generate earnings growth. Return on assets shows how profitable a company’s assets are in generating revenue. Return on assets is equal to net income divided by total assets.

Return On Assets: Return on assets is equal to net income divided by total assets.

This percentage shows what the company can do with what it has (i.e., how many dollars of earnings they derive from each dollar of assets they control). This is in contrast to return on equity, which measures a firm’s efficiency at generating profits from every unit of shareholders’ equity. Return on assets is, however, a vital component of return on equity, being an indicator of how profitable a company is before leverage is considered. In other words, return on assets makes up two-thirds of the DuPont equation measuring return on equity.

ROA, ROE, and Growth

In terms of growth rates, we use the value known as return on assets to determine a company’s internal growth rate. This is the maximum growth rate a firm can achieve without resorting to external financing. We use the value for return on equity, however, in determining a company’s sustainable growth rate, which is the maximum growth rate a firm can achieve without issuing new equity or changing its debt-to-equity ratio.

Capital Intensity and Growth

Return on assets gives us an indication of the capital intensity of the company. “Capital intensity” is the term for the amount of fixed or real capital present in relation to other factors of production, especially labor. The underlying concept here is how much output can be procured from a given input (assets!). The formula for capital intensity is below:

Capital Intensity=Total AssetsSales

The use of tools and machinery makes labor more effective, so rising capital intensity pushes up the productivity of labor. While companies that require large initial investments will generally have lower return on assets, it is possible that increased productivity will provide a higher growth rate for the company. Capital intensity can be stated quantitatively as the ratio of the total money value of capital equipment to the total potential output. However, when we adjust capital intensity for real market situations, such as the discounting of future cash flows, we find that it is not independent of the distribution of income. In other words, changes in the retention or dividend payout ratios can lead to changes in measured capital intensity.

 

 

1280px-DuPontModelEng.svg

Please see my related posts:

Rising Market Concentration and Declining Business Investments in the USA – Update June 2018

Why do Firms buyback their Shares? Causes and Consequences.

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

Trading Down: NAFTA, TPP, TATIP and Economic Globalization

On Inequality of Wealth and Income – Causes and Consequences

Rising Profits, Rising Inequality, and Rising Industry Concentration in the USA

Low Interest Rates and Business Investments : Update August 2017

Low Interest Rates and Monetary Policy Effectiveness

Low Interest Rates and Banks’ Profitability : Update July 2017

Short term Thinking in Investment Decisions of Businesses and Financial Markets

Mergers and Acquisitions – Long Term Trends and Waves

Business Investments and Low Interest Rates

The Decline in Long Term Real Interest Rates

Low Interest Rates and Banks Profitability: Update – December 2016

 

 Key Sources of Research:

 

 

 

The DuPont Equation, ROE, ROA, and Growth

https://courses.lumenlearning.com/boundless-finance/chapter/the-dupont-equation-roe-roa-and-growth/

 

 

Short-Termism in business: causes, mechanisms and consequences

EY Poland Report

 

Click to access Short-termism_raport_EY.pdf

 

 

Shareholders vs Stakeholders Capitalism

Fabian Brandt

Goethe University

Konstantinos Georgiou

University of Pennsylvania

 

https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1002&context=fisch_2016

 

 

Hedrick Smith Speaks to the Community about Who Stole the American Dream.

 

http://nhlabornews.com/2013/10/hedrick-smith-speaks-to-the-community-about-who-stole-the-american-dream/

 

 

Let’s Talk About “Maximizing Shareholder Value”

https://www.pragcap.com/lets-talk-about-maximizing-shareholder-value/

 

 

SHAREHOLDER CAPITALISM: A SYSTEM IN CRISIS

 

New Economics Foundation

 

Click to access NEF_SHAREHOLDER-CAPITALISM_E_latest.pdf

 

 

 

THE HISTORICAL CONTEXT OF SHAREHOLDER VALUE CAPITALISM

 

Mark S. Mizruchi and Howard Kirneldorf

 

Click to access 191bbc2b82f351633c7379deea7b9ccad0e9.pdf

 

 

Shareholder capitalism on trial

 

By Robert J. Samuelson

 

Click to access 03-19-15_WashingtonPost.pdf

 

 

 

The real business of business

McKinsey

 

https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Corporate%20Finance/MoF/Issue%2053/MoF53_The_real_business_of_business.ashx

 

 

 

Managers and Market Capitalism

 

Rebecca Henderson Karthik Ramanna

HBR

 

Click to access Henderson_Ramanna___Managers_and_Market_Capitalism___March_2013.pdf

 

 

The Embedded Firm: Corporate Governance, Labor, and Finance Capitalism

Peer Zumbansen

Cynthia A. Williams

 

http://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?article=1056&context=clpe

 

 

 

 

Andrew G Haldane: Who owns a company?

Speech by Mr Andrew G Haldane,

Executive Director and Chief Economist of the Bank of England,

at the University of Edinburgh Corporate Finance Conference, Edinburgh,

22 May 2015.

 

Click to access r150811a.pdf

 

 

 

 

Capitalism for the Long Term

MARCH 2011
HBR

The Short Long

 

Speech by
Andrew G Haldane, Executive Director, Financial Stability, and Richard Davies

29th Societé Universitaire Europeene de Recherches Financieres Colloquium: New Paradigms in Money and Finance?

Brussels

May 2011

 

https://www.bankofengland.co.uk/-/media/boe/files/speech/2011/the-short-long-speech-by-andrew-haldane

 

 

 

 

Is short-termism wrecking the economy?

Redefining capitalism

By Eric Beinhocker and Nick Hanauer

Fast finance and slow growth

 

Andy Haldane

http://progressive-policy.net/2015/09/fast-finance-and-slow-growth/

 

Beyond Shareholder Value

The reasons and choices for corporate governance reform

Click to access BSV.pdf

 

 

AN ECONOMY FOR THE 99%

It’s time to build a human economy that benefits everyone, not just the privileged few

OXFAM

 

Click to access bp-economy-for-99-percent-160117-en.pdf

 

 

Short-Termism

By Douglas K. Chia

 

Click to access 01181_millstein_10th_anniversary_essay_2_chia_v2.pdf

 

 

 

The Future of Finance

THE LSE REPORT

 

Click to access future-of-finance-chapter-3.pdf

 

 

 

Is Short-Term Behavior Jeopardizing the Future Prosperity of Business?

 

Click to access IsShortTermBehaviorJeopardizingTheFutureProsperityOfBusiness_CEOStrategicImplications.pdf

 

 

 

 

How Effective Capital Regulation can Help Reduce the Too‐Big‐To‐Fail Problem

Anat Admati

Stanford University

 

Click to access Minn-Fed-combined.pdf

 

 

 

Business School’s Worst Idea: Why the “Maximize Shareholder Value” Theory Is Bogus

Yves Smith

http://evonomics.com/maximize-shareholder-value-theory-yves-smith/

 

 

 

When Shareholder Capitalism Came to Town

The American Prospect

http://prospect.org/article/when-shareholder-capitalism-came-town

 

 

 

Competition Conference 2018

What’s the Evidence for Strengthening Competition Policy?

Boston University

July 2018

http://sites.bu.edu/tpri/competition-conference-2018/

 

 

 

Market Concentration

Issues paper by the Secretariat
6-8 June 2018

This document was prepared by the OECD Secretariat to serve as an issues paper for the hearing on market concentration taking place at the 129th meeting of the OECD Competition Committee on 6-8 June 2018

https://one.oecd.org/document/DAF/COMP/WD(2018)46/en/pdf

 

 

 

 

Monopoly’s New Era

In today’s economy, many industries can’t be analyzed through the lens of competition.

Chazen Global Insights
May 13, 2016

 

https://www8.gsb.columbia.edu/articles/chazen-global-insights/monopoly-s-new-era

 

 

 

Market power in the U.S. economy today

Washington Center for Equitable Growth

http://equitablegrowth.org/research-analysis/market-power-in-the-u-s-economy-today/

 

 

 

Don’t Panic: A Guide to Claims of Increasing Concentration

Gregory J. Werden

Luke Froeb

 

Date Written: April 5, 2018

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3156912

 

 

 

Market concentration

OECD

http://www.oecd.org/daf/competition/market-concentration.htm

 

 

 

 

A Firm-Level Perspective on the Role of Rents in the Rise in Inequality

Jason Furman Peter Orszag1

October 16, 2015

Click to access FurmanOrszag15.pdf

 

 

 

Do the Productivity Slowdown and the Inequality Increase Have a Common Cause?

Jason Furman (joint work with Peter Orszag)

Peterson Institute for International Economics
Washington, DC
November 9, 2017

Click to access 4-1furman20171109ppt.pdf

 

 

 

Is There a Connection Between Market Concentration and the Rise in Inequality?

https://promarket.org/connection-market-concentration-rise-inequality/

 

 

 

Concentrating on the Fall of the Labor Share

David; Dorn, David; Katz, Lawrence F; Patterson, Christina; Reenen, John Van

Click to access b8d7a989cab4b76e7fe795bf4572dbcdd0bc.pdf

 

 

 

 

Business Investment Spending Slowdown

April 9, 2018

FAS Congressional Research Services

Marc Labonte

Click to access IN10882.pdf

 

 

 

 

Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents

Lina Khan and Sandeep Vaheesan

Click to access HLP110.pdf

 

 

 

Five Myths about Economic Inequality in America

By Michael D. Tanner
September 7, 2016

 

Cato Institiute

https://www.cato.org/publications/policy-analysis/five-myths-about-economic-inequality-america

 

 

 

 

Is the US Public Corporation in Trouble?

Kathleen M. Kahle and René M. Stulz

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.31.3.67

 

 

 

Declining Labor and Capital Shares

Simcha Barkai

Click to access FeijooOnBarkai17.pdf

 

 

 

Growing Productivity without Growing Wages: The Micro-Level Anatomy of the Aggregate Labor Share Decline

Kehrig, Matthias; Vincent, Nicolas

(2017)

Click to access cesifo1_wp6454.pdf

 

 

 

 

Declining Competition and Investment in the U.S.

Germán Gutiérrez† and Thomas Philippon‡

March 2017

Click to access IK_Comp_v1.pdf

 

 

 

ACCOUNTING FOR RISING CORPORATE PROFITS: INTANGIBLES OR REGULATORY
RENTS?

James Bessen

Boston University School of Law

November 9, 2016

Click to access Accounting-for-Rising-Corporate-Profits.pdf

 

 

 

 

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

Gauti Eggertsson
Jacob A. Robbins
Ella Getz Wold

Feb 2018

Click to access 02052018-WP-kaldor-piketty-monopoly-power.pdf

 

 

 

 

Is There an Investment Gap in Advanced Economies? If So, Why?

Robin Döttling

German Gutierrez Gallardo

Thomas Philippon

 

Date Written: July 2017

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3002796

 

 

 

 

Antitrust in a Time of Populism

Professor Carl Shapiro

CRESSE 2017 Heraklion – Crete, Greece

2 July 2017

Click to access 2017_Key_SHAPIRO.pdf

 

 

 

The Incredible Shrinking Universe of Stocks

The Causes and Consequences of Fewer U.S. Equities

Credit Suisse

March 2917

Click to access document_1072753661.pdf

 

 

 

Declining Competition and Investment in the U.S

German Gutierrez Gallardo

Thomas Philippon

 

Date Written: December 2017

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3095586

 

 

 

 

The Fall and Rise of Market Power in Europe

John P. Weche and Achim Wambach

Click to access dp18003.pdf

Click to access 1011811367.pdf

 

 

 

 

On the Formation of Capital and Wealth: IT, Monopoly Power and Rising Inequality

Mordecai Kurz,

Stanford University

2018

Click to access e50bf8be5c75f1cca2e9e3d4afa4b8b8ac84.pdf

 

 

 

 

Appendix for \Investment-less Growth: An Empirical Investigation”

 

German Gutierrez and Thomas Philippony

March 2018

Click to access gutierrezappendixfa17bpea.pdf

 

 

 

 

WP 18-4 Slower Productivity and Higher Inequality: Are They Related?

Jason Furman and Peter Orszag

June 2018

PIIE

Click to access wp18-4.pdf

 

 

 

 

THE FUTURE OF PRODUCTIVITY

OECD

2015

 

Click to access OECD-2015-The-future-of-productivity-book.pdf

 

 

 

 

OECD Study on the Future of Productivity

Video

PIIE

 

 

 

 

 

A productivity perspective on the future of growth

By James Manyika, Jaana Remes, and Jonathan Woetzel
McKinsey
2014

https://www.mckinsey.com/featured-insights/employment-and-growth/a-productivity-perspective-on-the-future-of-growth

 

 

 

 

The future of productivity in manufacturing

Anne Green, Terence Hogarth, Erika Kispeter, David Owen

Peter Glover

February 2016

Click to access ier_2016_manufacturing_sector_productivity_report.pdf

 

 

 

 

THE PRODUCTIVITY OUTLOOK: PESSIMISTS VERSUS OPTIMISTS

August 2016

Zia Qureshi
at the Brookings Institution

Click to access productivity-outlook.pdf

 

 

 

The Slowdown in Productivity Growth: A View from International Trade

Development Issues No. 11

UN

April 2017

Click to access dsp_policy_11.pdf

 

 

 

 

Five Puzzles in the Behavior of Productivity, Investment, and Innovation

Robert J. Gordon

NBER

August 2004

http://www.nber.org/papers/w10660

 

 

 

 

AN OECD AGENDA ON ISSUES IN PRODUCTIVITY MEASUREMENT

Paul Schreyer

OECD Statistics Directorate
2016 World KLEMS Conference
Madrid, May 23-24 2016

Click to access worldklems2016_Schreyer_slides.pdf

 

 

 

THE FUTURE OF PRODUCTIVITY

Chiara Criscuolo
Directorate for Science, Technology and Innovation OECD

Understanding the Great recession: from micro to macro
Bank of England
London | 24 September 2015

Click to access CCriscuolo.pdf

 

 

 

 

 

Industry 4.0

The future of Productivity and Growth in Manufacturing Industries

BCG

Click to access media.media.72e472fb-1698-4a15-8858-344351c8902f.original.pdf

 

 

 

 

The waning of productivity growth

Raymond Van der Putten

http://economic-research.bnpparibas.com/Views/DisplayPublication.aspx?type=document&IdPdf=29178

 

 

The Impact of Robots on Productivity, Employment and Jobs

A positioning paper by the International Federation of Robotics

April 2017

Click to access IFR_The_Impact_of_Robots_on_Employment.pdf

 

 

 

 

The fall in productivity growth: causes and implications

Speech given by Silvana Tenreyro, External MPC Member, Bank of England

Peston Lecture Theatre, Queen Mary University of London

15 January 2018

https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/the-fall-in-productivity-growth-causes-and-implications

 

 

 

Artificial Intelligence, Automation, and the Economy

Science and Technology Council

Executive Office of the President

December 2016

Click to access EMBARGOED%20AI%20Economy%20Report.pdf

 

 

 

 

Long-term growth and productivity projections in advanced countries

Gilbert Cette, Rémy Lecat & Carole Ly-Marin

Working Paper #617

December 2016

Bank of France

Click to access DT617.pdf

 

 

 

ARE WE APPROACHING AN ECONOMIC SINGULARITY?
INFORMATION TECHNOLOGY AND THE FUTURE OF ECONOMIC GROWTH

By
William D. Nordhaus

September 2015

Click to access d2021.pdf

 

 

 

Challenges for the Future of Chinese Economic Growth

Jane Haltmaier

Federal Reseve Bank USA

2013

Click to access ifdp1072.pdf

 

 

 

Innovation, research and the UK’s productivity crisis.

Richard Jones

SPERI Paper No. 28

Click to access SPERI-Paper-28-Innovation-research-and-the-UK-productivity-crisis.pdf

 

 

 

Think Like an Enterprise: Why Nations Need Comprehensive Productivity Strategies

BY ROBERT D. ATKINSON

MAY 2016

Click to access 2016-think-like-an-enterprise.pdf

 

 

 

Solving the productivity puzzle

By Jaana Remes, James Manyika, Jacques Bughin, Jonathan Woetzel, Jan Mischke, and Mekala Krishnan

McKinsey

Feb 2018

https://www.mckinsey.com/featured-insights/meeting-societys-expectations/solving-the-productivity-puzzle

 

 

 

Solving the productivity puzzle: the role of demand and the promise of digitization

DR. JAN MISCHKE

McKinsey Global Institute

May 2018

Click to access 20180523-MGI_Solving-the-productivity-puzzle_Bruegel.pdf

 

 

Worried about Concentration? Then Worry about Rent-Seeking

By Brink Lindsey and Steven Teles
This article appeared on ProMarket on April 18, 2017.

 

https://www.cato.org/publications/commentary/worried-about-concentration-then-worry-about-rent-seeking

 

 

 

Online platforms, distortion of markets, social impacts and freedom of expression

Oxford Centre for Competition law and policy

22 May 2017

Tim Cowen.

Click to access Tim_Cowen_Oxford_Centre_for_Competition_Law_and_Policy_speech_22May2017—updated-21.09.2017.pdf

 

 

 

What’s Behind the Increase in Inequality?

By Eileen Appelbaum*

September 2017

Click to access whats-behind-the-increase-in-inequality-2017-09.pdf

 

 

 

A NATIONAL COMPETITION POLICY: UNPACKING THE PROBLEM OF DECLINING COMPETITION AND SETTING PRIORITIES MOVING FORWARD

American Antitrust Institute

September 28, 2016

Click to access AAINatlCompPolicy.pdf

 

 

 

AI and the Economy

Jason Furman
Harvard Kennedy School
Cambridge, MA

Robert Seamans
NYU Stern School of Business
New York, NY

29 May 2018

Click to access c14099.pdf

 

 

 

The United States and Europe: Short-Run Divergence and Long-Run Challenges

Jason Furman
Chairman, Council of Economic Advisers

Remarks at Bruegel
Brussels, Belgium
May 11, 2016

Click to access The-United-States-and-Europe-Short-Run-Divergence-and-Long-Run-Challenges-Jason-Furman.pdf

 

 

 

 

Business Investment Spending Slowdown

April 9, 2018

Marc Labonte

CRS Insights

Click to access IN10882.pdf

 

 

 

 

ECONOMIC REPORT OF THE PRESIDENT

Together With
THE ANNUAL REPORT
of the
COUNCIL OF ECONOMIC ADVISERS

Feb 2016

Click to access ERP-2016.pdf

 

 

Keynote Remarks of Commissioner Terrell McSweeny

Washington Center for Equitable Growth

Making Antitrust Work for the 21st Century

Washington, DC

October 6, 2016

Click to access mcsweeny_-_keynote_remarks_at_equitable_growth_10-6-16.pdf

 

 

Wal-Mart: A Progressive Success Story

Jason Furman

November 28, 2005

Click to access walmart.pdf

 

 

“America Without Entrepreneurs: The Consequences of Dwindling Startup Activity”

Testimony before
The Committee on Small Business and Entrepreneurship
United States Senate
June 29, 2016

John W. Lettieri
Cofounder
& Senior Director for Policy and Strategy
Economic Innovation Group

Click to access 7F75741C1A2E6182E1A5D21B61D278F3.lettieri-testimony.pdf

 

 

 

 

A reading list on market power, superstar firms, and inequality

BLOG

http://www.beyondthetimes.com/2017/08/16/a-partial-reading-list-on-market-power-superstar-firms-and-inequality/

 

 

 

 

 

Productivity Growth in the Advanced Economies:The Past, the Present, and Lessons for the Futures

Jason Furman

Chairman, Council of Economic Advisers

July 2015

Click to access 20150709_productivity_advanced_economies_piie_slides.pdf

 

 

 

 

 

Forms and sources of inequality in the United States

Jason Furman

17 March 2016

VOXEU

 

https://voxeu.org/article/forms-and-sources-inequality-united-states

 

 

 

 

Business Investment in the United States: Facts, Explanations, Puzzles, and Policies

Jason Furman
Chairman, Council of Economic Advisers
Progressive Policy Ins9tute

September 30, 2015

Click to access 2015.09.30-Jason-Furman_Business-Investment-in-US-Facts-Explanations-Puzzles-Policies.pdf

 

 

 

 

Can Tax Reform Get Us to 3 Percent Growth?

Jason Furman
Harvard Kennedy School & Peterson Institute for International Economics

New York, NY
November 3, 2017

Click to access furman20171103ppt.pdf

 

 

 

 

Structural Challenges and Opportunities in the U.S. Economy

Jason Furman
Chairman, Council of Economic Advisers

London School of Economics
November 5, 2014

Click to access 20141105_1830_structuralOpportunitiesUSEconomy_tr.pdf

 

 

Is This Time Different? The Opportunities and Challenges of Artificial Intelligence

Jason Furman
Chairman, Council of Economic Advisers

Remarks at AI Now: The Social and Economic Implications of Artificial Intelligence Technologies in the Near Term
New York University
New York, NY

July 7, 2016

Click to access 20160707_cea_ai_furman.pdf

 

 

 

 

Rebalancing the U.S. Economy

Jason Furman

Click to access TIE_Sp15_Furman.pdf

 

 

 

 

Should Policymakers Care Whether Inequality Is Helpful or Harmful For Growth?

Jason Furman

Harvard Kennedy School & Peterson Institute for International Economics
Rethinking Macroeconomic Conference, October 11-12 2017

Preliminary Draft: October 5, 2017

Click to access furman20171012paper.pdf

 

 

 

 

 

A Political Economy of Oligarchy: Winner-take-all ideology, superstar norms, and the rise of the 1%

Yochai Benkler

September, 2017

Click to access Political%20economy%20of%20oligarchy%2001.pdf

 

 

 

 

Can Trump Overcome Secular Stagnation?
Part One: The Demand Side *

James K. Galbraith

Click to access can_trump_overcome_secular_stagnation.pdf

 

 

 

 

The macroeconomic effects of the 2017 tax reform

Robert J. Barro, Harvard University
Jason Furman, Harvard University

March 2018

Click to access 4_barrofurman.pdf

 

 

 

 

A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY

McKinsey Global Institute

January 2017

https://www.mckinsey.com/~/media/mckinsey/featured%20insights/Digital%20Disruption/Harnessing%20automation%20for%20a%20future%20that%20works/A-future-that-works-Executive-summary-MGI-January-2017.ashx

 

 

 

A MISSING LINK: THE ROLE OF ANTITRUST LAW IN RECTIFYING EMPLOYER POWER IN OUR HIGH-PROFIT, LOW-WAGE ECONOMY

ISSUE BRIEF BY MARSHALL STEINBAUM

APRIL 2018

Click to access Monopsony-issue-brief.pdf

 

 

 

Inclusive Growth

For once, some good news

by jason furman

Click to access 16-29-MR64.pdf

 

 

 

 

The Outlook for the U.S. Economy and the Policies of the New President

Jason Furman
Senior Fellow, PIIE
Peterson Institute for International Economics |

SNS/SHOF Finance Panel

Stockholm

June 12, 2017

Click to access furman20170612ppt.pdf

 

 

 

 

The Role of Economists in Economic Policymaking

Jason Furman
Senior Fellow, Peterson Institute for International Economics

Arnold C. Harberger Distinguished Lecture on Economic Development
UCLA Burkle Center for International Relations
Los Angeles, CA

April 27, 2017

Click to access furman20170427.pdf

 

 

 

 

Market Concentration – Note by the United States

Hearing on Market Concentration
7 June 2018

OECD

Click to access market_concentration_united_states.pdf

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2018)59&docLanguage=En

 

 

 

 

The fringe economic theory that might get traction in the 2016 campaign

 

https://www.washingtonpost.com/news/wonk/wp/2015/03/02/the-fringe-economic-theory-that-might-get-traction-in-the-2016-campaign/?noredirect=on&utm_term=.77c5e3479485

 

 

 

ACHIEVING INCLUSIVE GROWTH IN THE FACE OF DIGITAL TRANSFORMATION AND THE FUTURE OF WORK

OECD

Click to access achieving_inclusive_growth_in_the_face_of_digital_transformation_and_the_future_of_work_oecd_0.pdf

Cash and Investments: Corporate Savings Glut in USA

Cash and Investments: Corporate Savings Glut in USA

 

Profits/Retained Earnings of a firm can be used in number of ways:

  • Capital Investments
  • Debt Repayment
  • Dividends
  • Cash and Short Term Investments
  • Long Term Investments
  • Share Buybacks
  • M&A Investments

Please see three quarterly reports from FACTSET on trends in

  • Dividents
  • Buybacks
  • Cash and Investments

Share buybacks are very common for several years.

Please see my related posts

Why do Firms buyback their Shares? Causes and Consequences.

Low Interest Rates and Business Investments : Update August 2017

Short term Thinking in Investment Decisions of Businesses and Financial Markets

Mergers and Acquisitions – Long Term Trends and Waves

Business Investments and Low Interest Rates

 

From The Corporate Saving Glut in the Aftermath of the Global Financial Crisis

cash

From Why Are Corporations Holding So Much Cash?

cash 2cash3

 

From FACTSET Cash and Investment Quarterly

cash4

Companies are holding on to the large sum of cash.  Rather than capital investments (CAPEX), cash is being used for share buybacks, dividend payouts, mergers and acquisitions, and cash investments (short and long term).

 

From FACTSET Cash and Investment Quarterly

cash5

Key Sources of Research:

 

The Corporate Saving Glut in the Aftermath of the Global Financial Crisis

Joseph W. Gruber
Steven B. Kamin

This Draft: June 2015

Click to access Gruber.pdf

 

The global corporate saving glut: Long-term evidence

Peter Chen, Loukas Karabarbounis, Brent Neiman

05 April 2017

http://voxeu.org/article/global-corporate-saving-glut

 

 

 

Declining Labor Shares and the Global Rise of Corporate Saving

Loukas Karabarbounis

Brent Neiman

October 2012

Click to access labshare.pdf

 

The Global Rise of Corporate Saving

Peter Chen

Loukas Karabarbounis

Brent Neiman

March 2017

Click to access CKN.pdf

Click to access w23133.pdf

 

FACTSET Dividend Quarterly

https://www.factset.com/websitefiles/PDFs/dividend

 

FACTSET Buyback Quarterly

https://www.factset.com/websitefiles/PDFs/buyback

FACTSET Cash and Investment Quarterly

https://www.factset.com/websitefiles/PDFs/cashinvestment

Click to access Cash%20and%20Investment%20Quarterly%20Q3%202016_12.21.16_v2.pdf

 

 

 

Why Are Corporations Holding So Much Cash?

By Juan M. Sanchez and Emircan Yurdagul

2013

 

Click to access RE_Jan_2013.pdf

 

 

Why Do Companies Hold Cash?

Gianni La Cava and Callan Windsor

RDP 2016-03

 

Click to access rdp2016-03.pdf

 

 

MULTINATIONALS AND THE HIGH CASH HOLDINGS PUZZLE

Lee Pinkowitz

René M. Stulz Rohan Williamson

June 2012

 

http://www.nber.org/papers/w18120.pdf?new_window=1

 

 

 

The Determinants and Implications of Corporate Cash Holdings

Tim Opler, Lee Pinkowitz, Rene Stulz, Rohan Williamson

Issued in October 1997

Click to access w6234.pdf

 

 

WHY DO U.S. FIRMS HOLD SO MUCH MORE CASH THAN THEY USED TO?

Thomas W. Bates Kathleen M. Kahle Rene M. Stulz

September 2006

 

Click to access w12534.pdf

 

 

Why do firms hold so much cash? A tax-based explanation

C. Fritz Foley, Jay C. Hartzell, Sheridan Titman, and Garry Twite

October 2006

 

Click to access w12649.pdf

 

 

It’s Alive! Corporate Cash and Business Investment

Finn Poschmann

 

Click to access e-brief_181.pdf

 

 

Dead money

There are good reasons for hoarding cash.

John Lorinc

 

http://www.canadianbusiness.com/economy/dead-money/

 

 

IS “DEAD” MONEY ALIVE? A FIRM-LEVEL ANALYSIS OF CANADIAN NON-FINANCIAL LISTED CORPORATIONS CASH HOLDING AND CAPITAL EXPENDITURE BEHAVIOR

2014

IMF

 

Click to access cr1428.pdf

Why do Firms buyback their Shares? Causes and Consequences.

Why do Firms buyback their Shares? Causes and Consequences.

 

From Stock buybacks: From retain-and reinvest to downsize-and-distribute

Since the late 1980s, in the name of “maximizing shareholder value” (MSV), U.S. corporate distributions to shareholders have exploded. Dividends are the traditional mode of providing a stream of income to shareholders who, as the name says, hold on to a company’s stock, thus supporting stock-price stability. In contrast, stock repurchases, in which a company buys back its own shares from the marketplace, thus reducing the number of outstanding shares, provide short-term boosts to a company’s stock price, thus contributing to stock-price volatility. Until the mid-1980s dividends were the overwhelmingly predominant form of distributing cash to shareholders. Since then, however, even with dividends on the rise, stock buybacks have added substantially to distributions to shareholders.

Over the decade 2004-2013, 454 companies in S&P 500 Index in March 2014 that were publicly listed over the ten years did $3.4 trillion in stock buybacks, representing 51 percent of net income. These companies expended an additional 35 percent of net income on dividends.5 And buybacks remain in vogue: According to data compiled by Factset, for the 12-month period ending December 2014, S&P 500 companies spent $565 billion on buybacks, up 18 percent from the previous 12-month period.6

Stock buybacks are an important part of the explanation for both the concentration of income among the richest households and the disappearance of middle-class employment opportunities in the United States over the past three decades.7 Over that period the resource-allocation regime at many, if not most, major U.S. business corporations has transitioned from “retain-and-reinvest” to “downsize-and-distribute.” Under retain-and-reinvest, the corporation retains earnings and reinvests them in the productive capabilities embodied in its labor force. Under downsize-and-distribute, the corporation lays off experienced, and often more expensive, workers, and distributes corporate cash to shareholders.8 My research suggests that, with its downsize-and-distribute resource-allocation regime, the “buyback corporation” is in large part responsible for a national economy characterized by income inequity, employment instability, and diminished innovative capability – or the opposite of what I have called “sustainable prosperity.”9

 

 From Buyback Quarterly – Factset/December 2016

buyback2

 

From Stock buybacks: From retain-and reinvest to downsize-and-distribute

buyback

Profits Without Prosperity

 

Five years after the official end of the Great Recession, corporate profits are high, and the stock market is booming. Yet most Americans are not sharing in the recovery. While the top 0.1% of income recipients—which include most of the highest-ranking corporate executives—reap almost all the income gains, good jobs keep disappearing, and new employment opportunities tend to be insecure and underpaid. Corporate profitability is not translating into widespread economic prosperity.

The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.

The buyback wave has gotten so big, in fact, that even shareholders—the presumed beneficiaries of all this corporate largesse—are getting worried. “It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies,” Laurence Fink, the chairman and CEO of BlackRock, the world’s largest asset manager, wrote in an open letter to corporate America in March. “Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.”

Why are such massive resources being devoted to stock repurchases? Corporate executives give several reasons, which I will discuss later. But none of them has close to the explanatory power of this simple truth: Stock-based instruments make up the majority of their pay, and in the short term buybacks drive up stock prices. In 2012 the 500 highest-paid executives named in proxy statements of U.S. public companies received, on average, $30.3 million each; 42% of their compensation came from stock options and 41% from stock awards. By increasing the demand for a company’s shares, open-market buybacks automatically lift its stock price, even if only temporarily, and can enable the company to hit quarterly earnings per share (EPS) targets.

As a result, the very people we rely on to make investments in the productive capabilities that will increase our shared prosperity are instead devoting most of their companies’ profits to uses that will increase their own prosperity—with unsurprising results. Even when adjusted for inflation, the compensation of top U.S. executives has doubled or tripled since the first half of the 1990s, when it was already widely viewed as excessive. Meanwhile, overall U.S. economic performance has faltered.

If the U.S. is to achieve growth that distributes income equitably and provides stable employment, government and business leaders must take steps to bring both stock buybacks and executive pay under control. The nation’s economic health depends on it.

From Value Creation to Value Extraction

For three decades I’ve been studying how the resource allocation decisions of major U.S. corporations influence the relationship between value creation and value extraction, and how that relationship affects the U.S. economy. From the end of World War II until the late 1970s, a retain-and-reinvest approach to resource allocation prevailed at major U.S. corporations. They retained earnings and reinvested them in increasing their capabilities, first and foremost in the employees who helped make firms more competitive. They provided workers with higher incomes and greater job security, thus contributing to equitable, stable economic growth—what I call “sustainable prosperity.”

This pattern began to break down in the late 1970s, giving way to a downsize-and-distribute regime of reducing costs and then distributing the freed-up cash to financial interests, particularly shareholders. By favoring value extraction over value creation, this approach has contributed to employment instability and income inequality.

As documented by the economists Thomas Piketty and Emmanuel Saez, the richest 0.1% of U.S. households collected a record 12.3% of all U.S. income in 2007, surpassing their 11.5% share in 1928, on the eve of the Great Depression. In the financial crisis of 2008–2009, their share fell sharply, but it has since rebounded, hitting 11.3% in 2012.

Since the late 1980s, the largest component of the income of the top 0.1% has been compensation, driven by stock-based pay. Meanwhile, the growth of workers’ wages has been slow and sporadic, except during the internet boom of 1998–2000, the only time in the past 46 years when real wages rose by 2% or more for three years running. Since the late 1970s, average growth in real wages has increasingly lagged productivity growth. (See the exhibit “When Productivity and Wages Parted Ways.”)

When Productivity and Wages Parted Ways

From 1948 to the mid-1970s, increases in productivity and wages went hand in hand. Then a gap opened between the two.

Not coincidentally, U.S. employment relations have undergone a transformation in the past three decades. Mass plant closings eliminated millions of unionized blue-collar jobs. The norm of a white-collar worker’s spending his or her entire career with one company disappeared. And the seismic shift toward offshoring left all members of the U.S. labor force—even those with advanced education and substantial work experience—vulnerable to displacement.

To some extent these structural changes could be justified initially as necessary responses to changes in technology and competition. In the early 1980s permanent plant closings were triggered by the inroads superior Japanese manufacturers had made in consumer-durable and capital-goods industries. In the early 1990s one-company careers fell by the wayside in the IT sector because the open-systems architecture of the microelectronics revolution devalued the skills of older employees versed in proprietary technologies. And in the early 2000s the offshoring of more-routine tasks, such as writing unsophisticated software and manning customer call centers, sped up as a capable labor force emerged in low-wage developing economies and communications costs plunged, allowing U.S. companies to focus their domestic employees on higher-value-added work.

These practices chipped away at the loyalty and dampened the spending power of American workers, and often gave away key competitive capabilities of U.S. companies. Attracted by the quick financial gains they produced, many executives ignored the long-term effects and kept pursuing them well past the time they could be justified.

A turning point was the wave of hostile takeovers that swept the country in the 1980s. Corporate raiders often claimed that the complacent leaders of the targeted companies were failing to maximize returns to shareholders. That criticism prompted boards of directors to try to align the interests of management and shareholders by making stock-based pay a much bigger component of executive compensation.

Given incentives to maximize shareholder value and meet Wall Street’s expectations for ever higher quarterly EPS, top executives turned to massive stock repurchases, which helped them “manage” stock prices. The result: Trillions of dollars that could have been spent on innovation and job creation in the U.S. economy over the past three decades have instead been used to buy back shares for what is effectively stock-price manipulation.

Good Buybacks and Bad

Not all buybacks undermine shared prosperity. There are two major types: tender offers and open-market repurchases. With the former, a company contacts shareholders and offers to buy back their shares at a stipulated price by a certain near-term date, and then shareholders who find the price agreeable tender their shares to the company. Tender offers can be a way for executives who have substantial ownership stakes and care about a company’s long-term competitiveness to take advantage of a low stock price and concentrate ownership in their own hands. This can, among other things, free them from Wall Street’s pressure to maximize short-term profits and allow them to invest in the business. Henry Singleton was known for using tender offers in this way at Teledyne in the 1970s, and Warren Buffett for using them at GEICO in the 1980s. (GEICO became wholly owned by Buffett’s holding company, Berkshire Hathaway, in 1996.) As Buffett has noted, this kind of tender offer should be made when the share price is below the intrinsic value of the productive capabilities of the company and the company is profitable enough to repurchase the shares without impeding its real investment plans.

But tender offers constitute only a small portion of modern buybacks. Most are now done on the open market, and my research shows that they often come at the expense of investment in productive capabilities and, consequently, aren’t great for long-term shareholders.

Companies have been allowed to repurchase their shares on the open market with virtually no regulatory limits since 1982, when the SEC instituted Rule 10b-18 of the Securities Exchange Act. Under the rule, a corporation’s board of directors can authorize senior executives to repurchase up to a certain dollar amount of stock over a specified or open-ended period of time, and the company must publicly announce the buyback program. After that, management can buy a large number of the company’s shares on any given business day without fear that the SEC will charge it with stock-price manipulation—provided, among other things, that the amount does not exceed a “safe harbor” of 25% of the previous four weeks’ average daily trading volume. The SEC requires companies to report total quarterly repurchases but not daily ones, meaning that it cannot determine whether a company has breached the 25% limit without a special investigation.

Despite the escalation in buybacks over the past three decades, the SEC has only rarely launched proceedings against a company for using them to manipulate its stock price. And even within the 25% limit, companies can still make huge purchases: Exxon Mobil, by far the biggest stock repurchaser from 2003 to 2012, can buy back about $300 million worth of shares a day, and Apple up to $1.5 billion a day. In essence, Rule 10b-18 legalized stock market manipulation through open-market repurchases.

The rule was a major departure from the agency’s original mandate, laid out in the Securities Exchange Act in 1934. The act was a reaction to a host of unscrupulous activities that had fueled speculation in the Roaring ’20s, leading to the stock market crash of 1929 and the Great Depression. To prevent such shenanigans, the act gave the SEC broad powers to issue rules and regulations.

During the Reagan years, the SEC began to roll back those rules. The commission’s chairman from 1981 to 1987 was John Shad, a former vice chairman of E.F. Hutton and the first Wall Street insider to lead the commission in 50 years. He believed that the deregulation of securities markets would channel savings into economic investments more efficiently and that the isolated cases of fraud and manipulation that might go undetected did not justify onerous disclosure requirements for companies. The SEC’s adoption of Rule 10b-18 reflected that point of view.

Debunking the Justifications for Buybacks

Executives give three main justifications for open-market repurchases. Let’s examine them one by one:

1. Buybacks are investments in our undervalued shares that signal our confidence in the company’s future.

This makes some sense. But the reality is that over the past two decades major U.S. companies have tended to do buybacks in bull markets and cut back on them, often sharply, in bear markets. (See the exhibit “Where Did the Money from Productivity Increases Go?”) They buy high and, if they sell at all, sell low. Research by the Academic-Industry Research Network, a nonprofit I cofounded and lead, shows that companies that do buybacks never resell the shares at higher prices.

Where Did the Money from Productivity Increases Go?

Buybacks—as well as dividends—have skyrocketed in the past 20 years. (Note that these data are for the 251 companies that were in the S&P 500 in January 2013 and were public from 1981 through 2012. Inclusion of firms that went public after 1981, such as Microsoft, Cisco, Amgen, Oracle, and Dell, would make the increase in buybacks even more marked.) Though executives say they repurchase only undervalued stocks, buybacks increased when the stock market boomed, casting doubt on that claim.

Source: Standard & Poor’s Compustat database; the Academic-Industry Research Network.
Note: Mean repurchase and dividend amounts are in 2012 dollars.

 

Once in a while a company that bought high in a boom has been forced to sell low in a bust to alleviate financial distress. GE, for example, spent $3.2 billion on buybacks in the first three quarters of 2008, paying an average price of $31.84 per share. Then, in the last quarter, as the financial crisis brought about losses at GE Capital, the company did a $12 billion stock issue at an average share price of $22.25, in a failed attempt to protect its triple-A credit rating.

In general, when a company buys back shares at what turn out to be high prices, it eventually reduces the value of the stock held by continuing shareholders. “The continuing shareholder is penalized by repurchases above intrinsic value,” Warren Buffett wrote in his 1999 letter to Berkshire Hathaway shareholders. “Buying dollar bills for $1.10 is not good business for those who stick around.”

2. Buybacks are necessary to offset the dilution of earnings per share when employees exercise stock options.

Calculations that I have done for high-tech companies with broad-based stock option programs reveal that the volume of open-market repurchases is generally a multiple of the volume of options that employees exercise. In any case, there’s no logical economic rationale for doing repurchases to offset dilution from the exercise of employee stock options. Options are meant to motivate employees to work harder now to produce higher future returns for the company. Therefore, rather than using corporate cash to boost EPS immediately, executives should be willing to wait for the incentive to work. If the company generates higher earnings, employees can exercise their options at higher stock prices, and the company can allocate the increased earnings to investment in the next round of innovation.

3. Our company is mature and has run out of profitable investment opportunities; therefore, we should return its unneeded cash to shareholders.

Some people used to argue that buybacks were a more tax-efficient means of distributing money to shareholders than dividends. But that has not been the case since 2003, when the tax rates on long-term capital gains and qualified dividends were made the same. Much more important issues remain, however: What is the CEO’s main role and his or her responsibility to shareholders?

Companies that have built up productive capabilities over long periods typically have huge organizational and financial advantages when they enter related markets. One of the chief functions of top executives is to discover new opportunities for those capabilities. When they opt to do large open-market repurchases instead, it raises the question of whether these executives are doing their jobs.

A related issue is the notion that the CEO’s main obligation is to shareholders. It’s based on a misconception of the shareholders’ role in the modern corporation. The philosophical justification for giving them all excess corporate profits is that they are best positioned to allocate resources because they have the most interest in ensuring that capital generates the highest returns. This proposition is central to the “maximizing shareholder value” (MSV) arguments espoused over the years, most notably by Michael C. Jensen. The MSV school also posits that companies’ so-called free cash flow should be distributed to shareholders because only they make investments without a guaranteed return—and hence bear risk.

Why Money for Reinvestment Has Dried Up

Since the early 1980s, when restrictions on open-market buybacks were greatly eased, distributions to shareholders have absorbed a huge portion of net income, leaving much less for reinvestment in companies.

Note: Data are for the 251 companies that were in the S&P 500 Index in January 2013 and were publicly listed from 1981 through 2012. If the companies that went public after 1981, such as Microsoft, Cisco, Amgen, Oracle, and Dell, were included, repurchases as a percentage of net income would be even higher.

But the MSV school ignores other participants in the economy who bear risk by investing without a guaranteed return. Taxpayers take on such risk through government agencies that invest in infrastructure and knowledge creation. And workers take it on by investing in the development of their capabilities at the firms that employ them. As risk bearers, taxpayers, whose dollars support business enterprises, and workers, whose efforts generate productivity improvements, have claims on profits that are at least as strong as the shareholders’.

The irony of MSV is that public-company shareholders typically never invest in the value-creating capabilities of the company at all. Rather, they invest in outstanding shares in the hope that the stock price will rise. And a prime way in which corporate executives fuel that hope is by doing buybacks to manipulate the market. The only money that Apple ever raised from public shareholders was $97 million at its IPO in 1980. Yet in recent years, hedge fund activists such as David Einhorn and Carl Icahn—who played absolutely no role in the company’s success over the decades—have purchased large amounts of Apple stock and then pressured the company to announce some of the largest buyback programs in history.

The past decade’s huge increase in repurchases, in addition to high levels of dividends, have come at a time when U.S. industrial companies face new competitive challenges. This raises questions about how much of corporate cash flow is really “free” to be distributed to shareholders. Many academics—for example, Gary P. Pisano and Willy C. Shih of Harvard Business School, in their 2009 HBR article “Restoring American Competitiveness” and their book Producing Prosperity—have warned that if U.S. companies don’t start investing much more in research and manufacturing capabilities, they cannot expect to remain competitive in a range of advanced technology industries.

Retained earnings have always been the foundation for investments in innovation. Executives who subscribe to MSV are thus copping out of their responsibility to invest broadly and deeply in the productive capabilities their organizations need to continually innovate. MSV as commonly understood is a theory of value extraction, not value creation.

Executives Are Serving Their Own Interests

As I noted earlier, there is a simple, much more plausible explanation for the increase in open-market repurchases: the rise of stock-based pay. Combined with pressure from Wall Street, stock-based incentives make senior executives extremely motivated to do buybacks on a colossal and systemic scale.

Consider the 10 largest repurchasers, which spent a combined $859 billion on buybacks, an amount equal to 68% of their combined net income, from 2003 through 2012. (See the exhibit “The Top 10 Stock Repurchasers.”) During the same decade, their CEOs received, on average, a total of $168 million each in compensation. On average, 34% of their compensation was in the form of stock options and 24% in stock awards. At these companies the next four highest-paid senior executives each received, on average, $77 million in compensation during the 10 years—27% of it in stock options and 29% in stock awards. Yet since 2003 only three of the 10 largest repurchasers—Exxon Mobil, IBM, and Procter & Gamble—have outperformed the S&P 500 Index.

The Top 10 Stock Repurchasers 2003–2012

At most of the leading U.S. companies below, distributions to shareholders were well in excess of net income. These distributions came at great cost to innovation, employment, and—in cases such as oil refining and pharmaceuticals—customers who had to pay higher prices for products.

Sources: Standard & Poor’s Compustat database; Standard & Poor’s Execucomp database; the Academic-Industry Research Network.
Note: The percentages of stock-based pay include gains realized from exercising stock options for all years plus, for 2003–2005, the fair value of restricted stock grants or, for 2006–2012, gains realized on vesting of stock awards. Rounding to the nearest billion may affect total distributions and percentages of net income. *Steven Ballmer, Microsoft’s CEO from January 2000 to February 2014, did not receive any stock-based pay. He does, however, own about 4% of Microsoft’s shares, valued at more than $13 billion.

Reforming the System

Buybacks have become an unhealthy corporate obsession. Shifting corporations back to a retain-and-reinvest regime that promotes stable and equitable growth will take bold action. Here are three proposals:

Put an end to open-market buybacks.

In a 2003 update to Rule 10b-18, the SEC explained: “It is not appropriate for the safe harbor to be available when the issuer has a heightened incentive to manipulate its share price.” In practice, though, the stock-based pay of the executives who decide to do repurchases provides just this “heightened incentive.” To correct this glaring problem, the SEC should rescind the safe harbor.

A good first step toward that goal would be an extensive SEC study of the possible damage that open-market repurchases have done to capital formation, industrial corporations, and the U.S. economy over the past three decades. For example, during that period the amount of stock taken out of the market has exceeded the amount issued in almost every year; from 2004 through 2013 this net withdrawal averaged $316 billion a year. In aggregate, the stock market is not functioning as a source of funds for corporate investment. As I’ve already noted, retained earnings have always provided the base for such investment. I believe that the practice of tying executive compensation to stock price is undermining the formation of physical and human capital.

Rein in stock-based pay.

Many studies have shown that large companies tend to use the same set of consultants to benchmark executive compensation, and that each consultant recommends that the client pay its CEO well above average. As a result, compensation inevitably ratchets up over time. The studies also show that even declines in stock price increase executive pay: When a company’s stock price falls, the board stuffs even more options and stock awards into top executives’ packages, claiming that it must ensure that they won’t jump ship and will do whatever is necessary to get the stock price back up.

In 1991 the SEC began allowing top executives to keep the gains from immediately selling stock acquired from options. Previously, they had to hold the stock for six months or give up any “short-swing” gains. That decision has only served to reinforce top executives’ overriding personal interest in boosting stock prices. And because corporations aren’t required to disclose daily buyback activity, it gives executives the opportunity to trade, undetected, on inside information about when buybacks are being done. At the very least, the SEC should stop allowing executives to sell stock immediately after options are exercised. Such a rule could help launch a much-needed discussion of meaningful reform that goes beyond the 2010 Dodd-Frank Act’s “Say on Pay”—an ineffectual law that gives shareholders the right to make nonbinding recommendations to the board on compensation issues.

But overall the use of stock-based pay should be severely limited. Incentive compensation should be subject to performance criteria that reflect investment in innovative capabilities, not stock performance.

Transform the boards that determine executive compensation.

Boards are currently dominated by other CEOs, who have a strong bias toward ratifying higher pay packages for their peers. When approving enormous distributions to shareholders and stock-based pay for top executives, these directors believe they’re acting in the interests of shareholders.

That’s a big part of the problem. The vast majority of shareholders are simply investors in outstanding shares who can easily sell their stock when they want to lock in gains or minimize losses. As I argued earlier, the people who truly invest in the productive capabilities of corporations are taxpayers and workers. Taxpayers have an interest in whether a corporation that uses government investments can generate profits that allow it to pay taxes, which constitute the taxpayers’ returns on those investments. Workers have an interest in whether the company will be able to generate profits with which it can provide pay increases and stable career opportunities.

It’s time for the U.S. corporate governance system to enter the 21st century: Taxpayers and workers should have seats on boards. Their representatives would have the insights and incentives to ensure that executives allocate resources to investments in capabilities most likely to generate innovations and value.

Courage in Washington

After the Harvard Law School dean Erwin Griswold published “Are Stock Options Getting out of Hand?” in this magazine in 1960, Senator Albert Gore launched a campaign that persuaded Congress to whittle away special tax advantages for executive stock options. After the Tax Reform Act of 1976, the compensation expert Graef Crystal declared that stock options that qualified for the capital-gains tax rate, “once the most popular of all executive compensation devices…have been given the last rites by Congress.” It also happens that during the 1970s the share of all U.S. income that the top 0.1% of households got was at its lowest point in the past century.

The members of the U.S. Congress should show the courage and independence of their predecessors and go beyond “Say on Pay” to do something about excessive executive compensation. In addition, Congress should fix a broken tax regime that frequently rewards value extractors as if they were value creators and ignores the critical role of government investment in the infrastructure and knowledge that are so crucial to the competitiveness of U.S. business.

Instead, what we have now are corporations that lobby—often successfully—for federal subsidies for research, development, and exploration, while devoting far greater resources to stock buybacks. Here are three examples of such hypocrisy:

Alternative energy.

Exxon Mobil, while receiving about $600 million a year in U.S. government subsidies for oil exploration (according to the Center for American Progress), spends about $21 billion a year on buybacks. It spends virtually no money on alternative energy research.

Meanwhile, through the American Energy Innovation Council, top executives of Microsoft, GE, and other companies have lobbied the U.S. government to triple its investment in alternative energy research and subsidies, to $16 billion a year. Yet these companies had plenty of funds they could have invested in alternative energy on their own. Over the past decade Microsoft and GE, combined, have spent about that amount annually on buybacks.

Nanotechnology.

Intel executives have long lobbied the U.S. government to increase spending on nanotechnology research. In 2005, Intel’s then-CEO, Craig R. Barrett, argued that “it will take a massive, coordinated U.S. research effort involving academia, industry, and state and federal governments to ensure that America continues to be the world leader in information technology.” Yet from 2001, when the U.S. government launched the National Nanotechnology Initiative (NNI), through 2013 Intel’s expenditures on buybacks were almost four times the total NNI budget.

Pharmaceutical drugs.

In response to complaints that U.S. drug prices are at least twice those in any other country, Pfizer and other U.S. pharmaceutical companies have argued that the profits from these high prices—enabled by a generous intellectual-property regime and lax price regulation—permit more R&D to be done in the United States than elsewhere. Yet from 2003 through 2012, Pfizer funneled an amount equal to 71% of its profits into buybacks, and an amount equal to 75% of its profits into dividends. In other words, it spent more on buybacks and dividends than it earned and tapped its capital reserves to help fund them. The reality is, Americans pay high drug prices so that major pharmaceutical companies can boost their stock prices and pad executive pay.Given the importance of the stock market and corporations to the economy and society, U.S. regulators must step in to check the behavior of those who are unable or unwilling to control themselves. “The mission of the U.S. Securities and Exchange Commission,” the SEC’s website explains, “is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” Yet, as we have seen, in its rulings on and monitoring of stock buybacks and executive pay over three decades, the SEC has taken a course of action contrary to those objectives. It has enabled the wealthiest 0.1% of society, including top executives, to capture the lion’s share of the gains of U.S. productivity growth while the vast majority of Americans have been left behind. Rule 10b-18, in particular, has facilitated a rigged stock market that, by permitting the massive distribution of corporate cash to shareholders, has undermined capital formation, including human capital formation.

The corporate resource allocation process is America’s source of economic security or insecurity, as the case may be. If Americans want an economy in which corporate profits result in shared prosperity, the buyback and executive compensation binges will have to end. As with any addiction, there will be withdrawal pains. But the best executives may actually get satisfaction out of being paid a reasonable salary for allocating resources in ways that sustain the enterprise, provide higher standards of living to the workers who make it succeed, and generate tax revenues for the governments that provide it with crucial inputs.

A version of this article appeared in the September 2014 issue of Harvard Business Review.

Key Sources of Research:

Buybacks Around the World
Market Timing, Governance and Regulation

Alberto Manconi Urs Peyer Theo Vermaelen
September 2015

Click to access 1bb_around_the_world_revised_-_september_8_2015-2.pdf

 

 

EXPLOITING EXCESS RETURNS FROM SHARE BUYBACK ANNOUNCEMENTS

White Paper by Catalyst Capital Advisors

Click to access Catalyst_Buyback_Strategy_White_Paper_2013-12-31.pdf

 

 

BUYBACKS: FROM BASICS TO POLITICS

WILLIAM LAZONICK
The Academic-Industry Research Network

August 19, 2015

Click to access Lazonick-Buybacks-Basics-to-Politics-20150819.pdf

 

Investment Opportunities and Share Repurchases

Walter I. Boudry*
Jarl G. Kallberg
Crocker H. Liu

Current Version: 08 September 2009

http://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1503&context=articles

 

The savvy executive’s guide to buying back shares

By Bin Jiang and Tim Koller
Mckinsey
2011

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-savvy-executives-guide-to-buying-back-shares

 

 

The Real Effects of Share Repurchases

Heitor Almeida, Vyacheslav Fos, and Mathias Kronlund
University of Illinois at Urbana-Champaign

October 22, 2014

Click to access repo.pdf

 

Buybacks and the board: Director perspectives on the share repurchase revolution

Richard Fields, Tapestry Networks
August 2016

Click to access FINAL-Buybacks-Report-Aug-22-2016.pdf

 

 

 

The Cannibalized Company Part 2

How the cult of shareholder value has reshaped corporate America

By Karen Brettell, David Gaffen and David Rohde

http://www.reuters.com/investigates/special-report/usa-buybacks-pay/

 

 

The Cannibalized Company Part 1

How the cult of shareholder value has reshaped corporate America

By Karen Brettell, David Gaffen and David Rohde

http://www.reuters.com/investigates/special-report/usa-buybacks-cannibalized/

 

 

Corporate Buybacks and Capital Investment: An International Perspective

Joseph W. Gruber and Steven B. Kamin

20017

https://www.federalreserve.gov/econres/notes/ifdp-notes/corporate-buybacks-and-capital-investment-an-international-perspective-20170411.htm

 

 

The Case for Stock Buybacks

SEPTEMBER 15, 2017

https://hbr.org/2017/09/the-case-for-stock-buybacks

 

 

Profits Without Prosperity

FROM THE SEPTEMBER 2014 ISSUE

https://hbr.org/2014/09/profits-without-prosperity

 

 

Stock buybacks: From retain-and- reinvest to downsize-and-distribute

By William Lazonick

2015

 

Click to access lazonick.pdf

Stock Market Indicators: S&P 500 Buybacks & Dividends

 

Click to access buybackdiv.pdf

 

 

 

 Buyback Quarterly

FACTSET
20016

Click to access Buyback%20Quarterly%20Q3%202016_12.19.pdf

https://www.factset.com/websitefiles/PDFs/buyback

 

The Ugly Truth Behind Stock Buybacks

https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-should-be-required-to-vote-on-stock-buybacks/#13b556ce6b1e

Understanding Trade in Intermediate Goods

Understanding Trade in Intermediate Goods

 

One of the key source of International Trade statistics is a document published by the UNCTAD since 2013:

Key Statistics and Trends in International Trade

Please see references below to access reports for 2015 and 2016.

 

In 2014, out of USD 18.5 trillion in global trade, about USD 8 trillion was in intermediate goods.

 

From TRADE IN INTERMEDIATE GOODS AND SERVICES

Introduction: the international dimension of the exchange of intermediate inputs

1. Trade in intermediate inputs has been steadily growing over the last decade. However, despite the internationalisation of production and the increasing importance of outsourcing and foreign investment, some studies have found little rise in intermediate goods trade as a share of total trade1. More than half of goods trade is however made up of intermediate inputs and trade in services is even more of an intermediate type with about three quarters of trade flows being comprised of intermediate services. Trade in intermediate goods and services thus deserves special attention from trade policymakers and so far few studies have investigated how it differs from trade in consumption goods or services.

2. An intermediate good can be defined as an input to the production process that has itself been produced and, unlike capital, is used up in production3. The difference between intermediate and capital goods lies in the latter entering as a fixed asset in the production process. Like any primary factor (such as labour, land, or natural resources) capital is used but not used up in the production process4. On the contrary, an intermediate good is used, often transformed, and incorporated in the final output. As an input, an intermediate good has itself been produced and is hence defined in contrast to a primary input. As an output, an intermediate good is used to produce other goods (or services) contrary to a final good which is consumed and can be referred to as a “consumption good”.

3. Intermediate inputs are not restricted to material goods; they can also consist of services. Thelatter can be potentially used as an input to any sector of the economy; that is for the production of the same, or other services, as well as manufacturing goods. Symmetrically, manufacturing goods can be potentially used to produce the same, or other manufacturing goods, as well as services.

4. An important question we can ask is how to identify inputs among all goods and services produced in an economy. Many types of goods can be easily distinguished as inputs, when their use excludes them from final consumption. Notable examples include chemical substances, construction materials, or business services. The exact same type of good used as an input to some production process can however be destined to consumption. For instance, oranges can be sold to households as a final good, as well as to a factory as an input for food preparation. Telecommunication services can be sold to individuals or to business services firms as an intermediate input for their output. The United Nations distinguish commodities in each basic heading on the basis of the main end-use (United Nations, 2007). It is however recognized that many commodities that are traded internationally may be put to a variety of uses. Other methodologies involve the use of input-output (I-O) tables to distinguish between intermediate and consumption goods.

5. The importance of intermediate goods and services in the economy and trade is associated with a number of developments in the last decades. Growth and increased sophistication of production has given birth to strategies involving fragmentation and reorganisation of firm’s activities, both in terms of ownership boundaries, as in terms of the location for production. In what follows, the international dimension of the exchange of intermediate goods and services is explored by clarifying terms and concepts as well as the links between trade in intermediate inputs and FDI.

From Key Statistics and Trends in International Trade 2015

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From Key Statistics and Trends in International Trade 2015

inter2

 From Key Statistics and Trends in International Trade 2015

inter3

From Key Statistics and Trends in International Trade 2015

inter4

From Key Statistics and Trends in International Trade 2015

inter

From Key Statistics and Trends in International Trade 2015

inter5

From Key Statistics and Trends in International Trade 2015

inter6

From Key Statistics and Trends in International Trade 2015

inter7

From Key Statistics and Trends in International Trade 2015

Trade networks relating to global value chains have evolved during the last 10 years. In 2004, the East Asian production network was still in its infancy. Most trade flows of parts and components concerned the USA and the European Union, with a number of other countries loosely connected with these two main hubs. As of 2014 trade of parts and components was much more developed. The current state is characterized not only by the prominent role of China, but also by a much more tightly integrated network with a much larger number of countries many of which have multiple connections to different hubs.

From Mapping Global Value Chains: Intermediate Goods Trade and Structural Change in the World Economy

inter10inter11inter12

Key sources of Research:

 

TRADE IN INTERMEDIATE GOODS AND SERVICES

OECD Trade Policy Working Paper No. 93
by Sébastien Miroudot, Rainer Lanz and Alexandros Ragoussis

2009

Click to access 44056524.pdf

 

 

An Essay on Intra-Industry Trade in Intermediate Goods

Rosanna Pittiglio

2014

Click to access ME_2014051916452646.pdf

 

 

The Rise of International Supply Chains: Implications for Global Trade

Click to access GETR_Chapter1.2.pdf

 

 

 

Growing Trade in Intermediate Goods: Outsourcing, Global Sourcing or Increasing
Importance of MNE Networks?

by
Jörn Kleinert
October 2000

Click to access kap1006.pdf

 

 

 

Imported Inputs and the Gains from Trade

Ananth Ramanarayanan
University of Western Ontario
September, 2014

https://www.economics.utoronto.ca/index.php/index/research/downloadSeminarPaper/49816

 

 

 

Key Statistics and Trends in International Trade 2015

Division on International Trade in Goods and Services, and Commodities
United Nations Conference on Trade and Development

Click to access ditctab2015d1_en.pdf

 

 

 

Key Statistics and Trends in International Trade 2016

Division on International Trade in Goods and Services, and Commodities
United Nations Conference on Trade and Development

Click to access ditctab2016d3_en.pdf

 

 

Integration of Trade and Disintegration of Production in the Global Economy

Robert C. Feenstra
Revised, April 1998

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.39.7178&rep=rep1&type=pdf

 

 

 

GLOBAL VALUE CHAINS: CHALLENGES, OPPORTUNITIES, AND IMPLICATIONS FOR POLICY

OECD, WTO and World Bank Group
Report prepared for submission to the G20 Trade Ministers Meeting Sydney, Australia, 19 July 2014

Click to access gvc_report_g20_july_2014.pdf

 

 

Trade in Value Added: Concepts, Estimation and Analysis

Marko Javorsek* and Ignacio Camacho

20015

Click to access AWP150Trade%20in%20Value%20Added.pdf

 

 

The Similarities and Differences among Three Major Inter-Country Input-Output Databases and their Implications for Trade in Value-Added Estimates

Lin Jones and Zhi Wang, United States International Trade Commission Li Xin, Beijing Normal University and Peking University Christophe Degain, World Trade Organization

December, 2014

Click to access ec201412b.pdf

 

 

Advanced Topics in Trade
Lecture 9 – Multinational Firms and Foreign Direct Investment

Heiwai Tang – SAIS
April 8, 2015

Click to access lecture_8_new.pdf

 

 

Efforts to Measure Trade in Value-Added and Map Global Value Chains: A Guide

Andrew Reamer

May 29, 2014

Click to access Reamer_ISA_Trade_in_Value_Added_05-29-2014.pdf

 

 

 

Global Value Chains for Value Added and Intermediate Goods in Asia

N Shrestha

20015

Click to access CESSA%20WP%202015-07.pdf

 

 

 

Global Value Chains: The New Reality of International Trade

Sherry Stephenson
December 2013

Click to access E15-GVCs-Stephenson-Final.pdf

 

 

Asia and Global Production Networks Implications for Trade, Incomes and Economic Vulnerability

Benno Ferrarini

David Hummels

20014

Click to access asia-and-global-production-networks.pdf

 

 

Participation of Developing Countries in Global Value Chains:
Implications for Trade and Trade-Related Policies

by
Przemyslaw Kowalski, Javier Lopez Gonzalez, Alexandros Ragoussis
and Cristian Ugarte

Click to access OECD_Trade_Policy_Papers_179.pdf

 

 

GLOBAL VALUE CHAINS: SURVEYING DRIVERS, MEASURES AND IMPACTS

João Amador
Sónia Cabral

2014

Click to access wp20143.pdf

 

World Intermediate goods Exports By Country and Region

2014

WITS World International Trade Statistics

http://wits.worldbank.org/CountryProfile/en/Country/WLD/Year/2014/TradeFlow/Export/Partner/all/Product/UNCTAD-SoP2

 

 

Trade in global value chains

2013

WTO

Click to access its13_highlights4_e.pdf

 

 

The Rise of Trade in Intermediates: Policy Implications

  • February 10, 2011

http://carnegieendowment.org/2011/02/10/rise-of-trade-in-intermediates-policy-implications-pub-42578

 

 

International trade with intermediate and final goods under economic crisis

Elżbieta Czarny, Warsaw School of Economics
Paweł Folfas, Warsaw School of Economics
Katarzyna Śledziewska, Warsaw University

Click to access 375.pdf

 

 

 

Trade in Intermediate Goods: Implications for Productivity and Welfare in Korea

Young Gui Kim

Hak K. PYO

Date Written: December 30, 2016

 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2929118

 

 

Growing Together: Economic Ties between the United States and Mexico

BY CHRISTOPHER WILSON

Click to access growing_together_economic_ties_between_the_united_states_and_mexico.pdf

 

 

Mapping Global Value Chains: Intermediate Goods Trade and Structural Change in the World Economy

Timothy J. Sturgeon
Olga Memedovic

Click to access WP%2005%20Mapping%20Glocal%20Value%20Chains.pdf

 

India’s Intermediate Goods Trade in the Inter Regional Value Chain:
An examination based on Trade data and Input Output Analysis

Simi Thambi

Click to access 10_2%20fp.pdf

 

Global Supply Chains

Click to access pub4253_2.pdf

 

 

Global value chains in a changing world

Edited by Deborah K. Elms and Patrick Low

Click to access aid4tradeglobalvalue13_e.pdf

 

On Inequality of Wealth and Income – Causes and Consequences

 On Inequality of Wealth and Income – Causes and Consequences

 

Disparity in Wealth and Income of American workers/household is a hot public policy/economic/social/political issue.

  • Wealth (Stock)
  • Income (Flow)

what are the causes and consequences of Inequality on economics and society?

 

From TRENDS IN INCOME INEQUALITY AND ITS IMPACT ON ECONOMIC GROWTH (OECD)

The disparity in the distribution of household incomes has been rising over the past three decades in a vast majority of OECD countries and such long-term trend was interrupted only temporarily in the first years of the Great Recession. Addressing these trends has moved to the top of the policy agenda in many countries. This is partly due to worries that a persistently unbalanced sharing of the growth dividend will result in social resentment, fuelling populist and protectionist sentiments, and leading to political instability. Recent discussions, particularly in the US, about increased inequality being one possible cause of the 2008 financial crisis also contributed to its relevance for policy making. But another growing reason for the strong interest of policy makers in inequality is concern about whether the cumulatively large and sometimes rapid increase in inequality might have an effect on economic growth and on the pace of exit from the current recession. Is inequality a pre-requisite for growth? Or does a greater dispersion of incomes across individuals rather undermine growth? And which are the short and long-term consequences of redistributive policies on growth?

From Causes and Consequences of Income Inequality: A Global Perspective (IMF)

Widening income inequality is the defining challenge of our time. In advanced economies, the gap between the rich and poor is at its highest level in decades. Inequality trends have been more mixed in emerging markets and developing countries (EMDCs), with some countries experiencing declining inequality, but pervasive inequities in access to education, health care, and finance remain. Not surprisingly then, the extent of inequality, its drivers, and what to do about it have become some of the most hotly debated issues by policymakers and researchers alike. Against this background, the objective of this paper is two-fold.

First, we show why policymakers need to focus on the poor and the middle class. Earlier IMF work has shown that income inequality matters for growth and its sustainability. Our analysis suggests that the income distribution itself matters for growth as well. Specifically, if the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20 percent (the poor) is associated with higher GDP growth. The poor and the middle class matter the most for growth via a number of interrelated economic, social, and political channels.

Second, we investigate what explains the divergent trends in inequality developments across advanced economies and EMDCs, with a particular focus on the poor and the middle class. While most existing studies have focused on advanced countries and looked at the drivers of the Gini coefficient and the income of the rich, this study explores a more diverse group of countries and pays particular attention to the income shares of the poor and the middle class—the main engines of growth. Our analysis suggests that

  • Technological progress and the resulting rise in the skill premium (positives for growth and productivity) and the decline of some labor market institutions have contributed to inequality in both advanced economies and EMDCs. Globalization has played a smaller but reinforcing role. Interestingly, we find that rising skill premium is associated with widening income disparities in advanced countries, while financial deepening is associated with rising inequality in EMDCs, suggesting scope for policies that promote financial inclusion.

  • Policies that focus on the poor and the middle class can mitigate inequality. Irrespective of the level of economic development, better access to education and health care and well-targeted social policies, while ensuring that labor market institutions do not excessively penalize the poor, can help raise the income share for the poor and the middle class.

  • There is no one-size-fits-all approach to tackling inequality. The nature of appropriate policies depends on the underlying drivers and country-specific policy and institutional settings. In advanced economies, policies should focus on reforms to increase human capital and skills, coupled with making tax systems more progressive. In EMDCs, ensuring financial deepening is accompanied with greater financial inclusion and creating incentives for lowering informality would be important. More generally, complementarities between growth and income equalityobjectives suggest that policies aimed at raising average living standards can also influence the distribution of income and ensure a more inclusive prosperity.

From World changes in inequality: an overview of facts, causes, consequences and policies (BIS)

Public concern about inequality has grown substantially in recent years. Politicians and journalists descant with increasing frequency on the increase in inequality as a threat to social stability, laying the blame on globalisation and its attendant so-called neo-liberal policies. There is certainly much truth in such views. However, the lack of rigour in the public debate is striking, and one may doubt whether a constructive discussion of inequality, its causes and its economic, social and political consequences can take place without more clarity. Is it really the case that inequality is everywhere increasing more or less continuously, as actually seems to be happening in the United States? What type of inequality are we talking about: earnings, market income, household disposable income per consumption unit, wealth? What matters most: the inequality of opportunity or the inequality of economic outcome, including income? What kind of measure should be used? The recently highly publicised share of the top 5, 1.1% taken from tax data may not evolve in the same way as the familiar Gini coefficient defined on disposable incomes. And, then, what is known about the nature of the unequalising forces that seem to affect our economies and what tools might be available to counteract them?

In an international survey conducted in 2010, people were asked how they thought inequality had changed over the previous 10 years.1 In few countries was the perception of inequality trends in agreement with what could be observed from standard statistical sources about inequality. US citizens felt inequality had remained the same, whereas it was surging by most accounts, Brazilians found it was also increasing despite the fact that, for the first time in over 40 years, inequality was declining, while French and Dutch people thought that inequality had increased although the usual inequality coefficients were remarkably stable.

Good policies must rely on precise diagnostics. It is the purpose of this paper to take stock of what is known at this stage about the evolution of inequality around the world. In so doing, it will be shown that an ever-increasing degree of inequality at all times and everywhere over the last 30 years is far from the reality, and that there is a high degree of specificity across countries. In turn, this suggests that the combination of equalising and unequalising forces may be quite different from one country to another. Some factors may be common and truly global but others may be country-specific, the outcome being quite variable across countries. It also follows that tools to correct inequality, if need be, may have to differ in nature depending on the causes of increased inequality.

Tackling all these issues in depth is beyond the scope of this paper. My aim is only to offer an overview of what is observed and the main ideas being debated in the field of economic inequality. The paper is organised as follows. It starts with a quick “tour d‘horizon“ of the evidence for the evolution of various dimensions of economic inequality. It then tackles the issue of the potential causes, identifying what may be seen as common to most countries and what may be specific. Finally, it touches upon the consequences of excessive inequality and the tools available to counter it, emphasising the rising constraints imposed by globalisation.

Causes of Inequality

  • Shareholder Capitalism
  • Focus on Cost Minimization
  • Focus on ROIC and Economic Value Added (EVA)
  • Consolidation – Mergers and Acquisitions
  • Free Trade Agreements – NAFTA
  • Increased Outsourcing
  • Global Commodity Chains
  • Global Production Networks
  • Global Value Chains
  • Lack of Educated Workforce
  • Lack of protection for Low income earners
  • Compensation for Executives vs Labor
  • Unemployment, Underemployment
  • Value of High Skilled Technical Workers
  • Technological Change
  • Skills Obsolescence

Consequences of Inequality

  • Impact on Effective Demand
  • Slows Economic Growth
  • Decreased Economic Mobility
  • Health and Social effects
  • Living Standards at the Bottom (Poverty)
  • Intergenerational Mobility
  • Democratic Process and Social Justice
  • Reduced Consumption
  • Financial Crisis
  • Social Cohesion
  • Global Imbalances
  • Hampers Poverty reduction
  • Access to Health services
  • Access to Financial Services
  • Access to Education

 

Key Sources of Research:

 

The Age of Inequality

Edited by Jeremy Gantz

2017

 

 

The Price of Inequality

Joseph Stiglitz

2012

A Firm-Level Perspective on the Role of Rents in the Rise in Inequality

Jason Furman

Peter Orszag

October 16, 2015

http://gabriel-zucman.eu/files/teaching/FurmanOrszag15.pdf

Firming Up Inequality

Jae Song, David J. Price Fatih Guvenen, Nicholas Bloom

2015

http://eprints.lse.ac.uk/62587/1/dp1354.pdf

 

 

 TOWARDS A BROADER VIEW OF COMPETITION POLICY

 

Joseph E. Stiglitz

University Professor, Columbia University,

Chief Economist at the Roosevelt Institute

June 2017

https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/Towards%20a%20Broader%20View%20of%20Competition%20Policy_0.pdf

 

 

ACCOUNTING FOR RISING CORPORATE PROFITS: INTANGIBLES OR REGULATORY RENTS?

Boston University School of Law
Law & Economics Working Paper No. 16-18

November 9, 2016

https://www.bu.edu/law/files/2016/11/Accounting-for-Rising-Corporate-Profits.pdf

Inequality: Facts, Explanations, and Policies

Jason Furman
Chairman, Council of Economic Advisers

City College of New York New York, NY

October 17, 2016

https://obamawhitehouse.archives.gov/sites/default/files/page/files/20161017_furman_ccny_inequality_cea.pdf

Domestic Outsourcing, Rent Seeking, and Increasing Inequality

 Eileen Appelbaum

First Published July 21, 2017

http://journals.sagepub.com/doi/abs/10.1177/0486613417697121

 

Global Concentration and the Rise of China

Caroline Freund and Dario Sidhu

Peterson Institute for International Economics

http://econ.au.dk/fileadmin/Economics_Business/Research/Seminars/2016/Global_Concentration_Final.pdf

How Could Wage Inequality within and Across Enterprises Be Reduced?

Columbia Business School Research Paper No. 17-62

Posted: 10 Jun 2017 Last revised: 17 Aug 2017

Christian Moser

Columbia University

Date Written: December 15, 2016

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2983691

 

 

 

The Fall of the Labor Share and the Rise of Superstar Firms

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen

NBER Working Paper No. 23396
Issued in May 2017

http://www.nber.org/papers/w23396

Inequality: A Hidden Cost of Market Power

Posted: 29 Mar 2017 Last revised: 31 Mar 2017

Sean F. Ennis  Pedro Gonzaga  Chris Pike

Organization for Economic Co-Operation and Development (OECD) – Competition Division

Date Written: March 6, 2017

https://papers.ssrn.com/Sol3/papers.cfm?abstract_id=2942791

 

 

Wealth and Income Inequality in the Twenty-First Century

Joseph E. Stiglitz
International Economic Association World Congress
Mexico City
June 2017

https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/Wealth%20and%20Income%20Inequality%2021st%20Century.pdf

 

 

The Globalization of Production and Income Inequality in Rich Democracies

Matthew C Mahutga
Anthony Roberts
Ronald Kwon

Social Forces, Volume 96, Issue 1, 1 September 2017, Pages 181–214,

 

INCOME AND WEALTH INEQUALITY: EVIDENCE AND POLICY IMPLICATIONS

EMMANUEL SAEZ

Contemporary Economic Policy

Vol. 35, No. 1, January 2017, 7–25
Online Early publication October 14, 2016

 

https://eml.berkeley.edu/~saez/SaezCEP2017.pdf

 

 

Consequences of Rising Income Inequality

BY KEVIN J. LANSING AND AGNIESZKA MARKIEWICZ

October 17, 2016

Economic Research Department of the Federal Reserve Bank of San Francisco.

 

http://www.frbsf.org/economic-research/files/el2016-31.pdf

 

 

 

Top Incomes, Rising Inequality, and Welfare

Kevin J. Lansing
Federal Reserve Bank of San Francisco

Agnieszka Markiewicz

June 2016

http://www.frbsf.org/economic-research/files/wp12-23bk.pdf

 

 

Causes and Consequences of Income Inequality: A Global Perspective

Era Dabla-Norris, Kalpana Kochhar, Frantisek Ricka, Nujin Suphaphiphat, and Evridiki Tsounta
(with contributions from Preya Sharma and Veronique Salins)

IMF

June 2015

https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf

 

 

Piketty, Thomas. 2014.

Capital in the Twenty-First Century.

Cambridge, MA: Harvard University Press.

 

 

Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze—an Update to 2007

Edward N. Wolff

Levy Economics Institute of Bard College

March 2010

http://www.levyinstitute.org/pubs/wp_589.pdf

 

 

 

CONSUMPTION AND INCOME INEQUALITY IN THE U.S. SINCE THE 1960S

Bruce D. Meyer James X. Sullivan

NATIONAL BUREAU OF ECONOMIC RESEARCH

August 2017

http://www.nber.org/papers/w23655.pdf

 

 

Top Income Inequality in the 21st Century: Some Cautionary Notes

Fatih Guvenen Greg Kaplan

April 2, 2017

https://gregkaplan.uchicago.edu/sites/gregkaplan.uchicago.edu/files/uploads/top_income_inequality_web_April2_2017.pdf

 

FIFTY YEARS OF GROWTH IN AMERICAN CONSUMPTION, INCOME, AND WAGES

Bruce Sacerdote

May 16, 2017

http://www.dartmouth.edu/~bsacerdo/Sacerdote%2050%20Years%20of%20Growth%20in%20American%20Wages%20Income%20and%20Consumption%20May%202017.pdf

http://www.nber.org/papers/w23292.pdf

 

 

The Inequality Puzzle

BY LAWRENCE H. SUMMERS

 

http://democracyjournal.org/magazine/33/the-inequality-puzzle/

 

 

 

 GLOBAL INEQUALITY DYNAMICS: NEW FINDINGS FROM WID.WORLD

Facundo Alvaredo Lucas Chancel Thomas Piketty Emmanuel Saez Gabriel Zucman

NATIONAL BUREAU OF ECONOMIC RESEARCH
February 2017, Revised April 2017

 

http://www.nber.org/papers/w23119.pdf

 

 

 

Power and inequality in the global political economy

NICOLA PHILLIPS

March 2017

https://academic.oup.com/ia/article-lookup/doi/10.1093/ia/iix019

 

 

 Outsourcing governance: states and the politics of a ‘global value chain world’

Frederick W. Mayer & Nicola Phillips

04 Jan 2017

 

http://www.tandfonline.com/doi/full/10.1080/13563467.2016.1273341

 

 

What’s caused the rise in income inequality in the US?

https://www.weforum.org/agenda/2015/05/whats-caused-the-rise-in-income-inequality-in-the-us/

Why are American Workers getting Poorer? China, Trade and Offshoring

Avraham Ebenstein, Ann Harrison, Margaret McMillan

NBER Working Paper No. 21027
Issued in March 2015

http://www.nber.org/papers/w21027

 

 

 

The Geography of Trade and Technology Shocks in the United States

David H. Autor, David Dorn, and Gordon H. Hanson

American Economic Review

May 2013

https://www.aeaweb.org/articles?id=10.1257/aer.103.3.220

 

Economic Consequences of Income Inequality

Jason Furman
Joseph E. Stiglitz

https://pdfs.semanticscholar.org/cee6/1573cd50b9c8eae3379cf1f1c92301f40927.pdf

 

Labor’s Declining Share of Income and Rising Inequality

https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2012-economic-commentaries/ec-201213-labors-declining-share-of-income-and-rising-inequality.aspx

 

 

World changes in inequality: an overview of facts, causes, consequences and policies

by François Bourguignon
Monetary and Economic Department
August 2017

BIS working paper

http://www.bis.org/publ/work654.pdf

“Trends in Income Inequality and its Impact on Economic Growth”

OECD Social, Employment and Migration Working Papers, No. 163

http://www.oecd.org/social/inequality.htm

http://www.oecd.org/els/soc/trends-in-income-inequality-and-its-impact-on-economic-growth-SEM-WP163.pdf

 

Causes of income inequality in the United States

https://en.wikipedia.org/wiki/Causes_of_income_inequality_in_the_United_States

 

Economic inequality

https://en.wikipedia.org/wiki/Economic_inequality

 

 

Income inequality in the United States

https://en.wikipedia.org/wiki/Income_inequality_in_the_United_States

 

 

Redistribution, Inequality, and Growth

Prepared by Jonathan D. Ostry, Andrew Berg, Charalambos G. Tsangarides

 

April 2014

IMF

 

Click to access sdn1402.pdf

 

 

 

Understanding the Economic Impact of the H-1B Program on the U.S.

John Bound† Gaurav Khanna‡ Nicolas Morales§

April 20, 2017

 

Click to access c13842.pdf