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The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes


  • Josh Bivens
  • Lawrence Mishel


The debate over the extent and causes of rising inequality of American incomes and wages has now raged for at least two decades. In this paper, we will make four arguments. First, the increase in the incomes and wages of the top 1 percent over the last three decades should be interpreted as driven largely by the creation and/or redistribution of economic rents, and not simply as the outcome of well-functioning competitive markets rewarding skills or productivity based on marginal differences. This rise in rents accruing to the top 1 percent could be the result of increased opportunities for rentshifting, increased incentives for rent-shifting, or a combination of both. Second, this rise in incomes at the very top has been the primary impediment to having growth in living standards for low- and moderate-income households approach the growth rate of economy-wide productivity. Third, because this rise in top incomes is largely driven by rents, there is the potential for checking (or even reversing) this rise through policy measures with little to no adverse impact on overall economic growth. Lastly, this analysis suggests two complementary approaches for policymakers wishing to reverse the rise in the top 1 percent's share of income: dismantling the institutional sources of their increased ability to channel rents their way and/or reducing the return to this rent-seeking by significantly increasing marginal rates of taxation on high incomes.

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  • Josh Bivens & Lawrence Mishel, 2013. "The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 57-78, Summer.
  • Handle: RePEc:aea:jecper:v:27:y:2013:i:3:p:57-78 Note: DOI: 10.1257/jep.27.3.57

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    References listed on IDEAS

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    Cited by:

    1. Soon Ryoo, 2016. "Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective," Metroeconomica, Wiley Blackwell, vol. 67(2), pages 429-457, May.
    2. Lemieux, Thomas & Riddell, W. Craig, 2015. "Top Incomes in Canada: Evidence from the Census," CLSSRN working papers clsrn_admin-2015-12, Vancouver School of Economics, revised 07 Jul 2015.
    3. Joanne Lindley & Steven Mcintosh, 2017. "Finance Sector Wage Growth and the Role of Human Capital," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 570-591, August.
    4. repec:bla:worlde:v:40:y:2017:i:12:p:2639-2675 is not listed on IDEAS
    5. Caiani, Alessandro & Russo, Alberto & Gallegati, Mauro, 2016. "Does Inequality Hamper Innovation and Growth?," MPRA Paper 71864, University Library of Munich, Germany.
    6. Andrienko, Yuri & Apps, Patricia & Rees, Ray, 2014. "Optimal Taxation, Inequality and Top Incomes," IZA Discussion Papers 8275, Institute for the Study of Labor (IZA).
    7. Carrieri, Vincenzo & Principe, Francesco & Raitano, Michele, 2017. "What makes you "super-rich"? New evidence from an analysis of football players' earnings," Ruhr Economic Papers 681, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Iveta Pauhofová & Tomáš Želinský, 2015. "Regionálne aspekty príjmovej polarizácie v Slovenskej republike
      [Regional Aspects of Income Polarization in the Slovak Republic]
      ," Politická ekonomie, University of Economics, Prague, vol. 2015(6), pages 778-796.
    9. Wolfgang Keller & William W. Olney, 2017. "Globalization and Executive Compensation," Department of Economics Working Papers 2017-04, Department of Economics, Williams College.
    10. Naude, Wim & Nagler, Paula, 2015. "Industrialisation, Innovation, Inclusion," MERIT Working Papers 043, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. Brandon Lehr, 2016. "Optimal Social Insurance for Heterogeneous Agents With Private Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 301-333, June.
    12. Pierre-Yves Néron, 2015. "Egalitarianism and Executive Compensation: A Relational Argument," Journal of Business Ethics, Springer, vol. 132(1), pages 171-184, November.
    13. Raymundo M. Campos-Vazquez & Emmanuel Chavez & Gerardo Esquivel, 2017. "Growth is (really) good for the (really) rich," The World Economy, Wiley Blackwell, vol. 40(12), pages 2639-2675, December.
    14. Seth H. Giertz & Jacob A. Mortenson, 2013. "Recent Income Trends for Top Executives: Evidence From Tax Return Data," National Tax Journal, National Tax Association, vol. 66(4), pages 913-938, December.
    15. Yuri Andrienko & Patricia Apps & Ray Rees, 2016. "Optimal taxation and top incomes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(6), pages 981-1003, December.
    16. Seth D. Zimmerman, 2016. "Making the One Percent: The Role of Elite Universities and Elite Peers," NBER Working Papers 22900, National Bureau of Economic Research, Inc.
    17. Alain Trannoy, 2015. "Inequality and welfare: Is Europe special?," Working Papers 384, ECINEQ, Society for the Study of Economic Inequality.
    18. repec:elg:eechap:15325_18 is not listed on IDEAS

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation


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