NEW PARADIGM
The New Paradigm Papers of the Month of November
Once a month the Forum New Economy is showcasing a handful of selected research papers that lead the way towards a new economic paradigm.
BY
SONJA HENNENPUBLISHED
23. NOVEMBER 2023READING TIME
4 MIN
The Gender (Tax) Gap in Parental Transfers. Evidence from Administrative Inheritance and Gift Tax Data
Daria Tisch, Manuel Schechtl
This study examines how the German tax system, in combination with conservative attitudes within wealthy families, indirectly penalises women. The researchers identify two main reasons: one is that men inherit significantly more on average and also receive more gifts than women. The other that the gifts and inheritances women receive is worth less on average. In addition, women often receive different gifts than men. They are more likely to receive property and other valuables such as shares or cash, while men are more likely to receive the family business or forestry and agricultural holdings. Companies are treated particularly favourably by the tax system, leading men to benefit more from the existing tax exemptions. In contrast, daughters receive assets that are more expensive to tax, such as cash. The researchers call this the Gender Tax Gap, or Gender Gift Gap. The study hence adds the tax system as yet another factor implicated in the reproduction of gender wealth inequalities.
Billionaire Politicians: A Global Perspective
Daniel Krcmaric, Stephen C. Nelson, Andrew Roberts
This study examines the prevalence of billionaires in political roles. The authors base their research on an original dataset of formal political participation for over 2,000 individuals included in the Forbes Billionaires List. They find that billionaire politicians are a surprisingly common phenomenon, with over 11% of the world’s billionaires having held or sought political office. This rate of political participation is considered high even when compared to other elite groups known for producing politicians from their ranks. Moreover, billionaires, in the study, focus their political ambitions on influential positions, demonstrate a strong track record of winning elections, and tend to lean to the right ideologically. The research also documents substantial cross-national variation, indicating that a country’s number of billionaire politicians is not simply a product of its total number of billionaires but is instead related to regime type. Specifically, billionaires formally enter the political sphere at a much higher rate in autocracies than in democracies.
Economic Growth under Transformative AI
Philip Trammell & Anton Korinek
That the rapid development of artificial intelligence will change the world of work seems clear. But what will be the effects on the labor market and economic growth? Philip Trammell and Anton Korinek explore this question in a new working paper. They review the potential mechanisms through which AI could bring about changes on the growth in output per capita and the labor share by organizing various strands of the literature on AI and growth into a unified framework. They begin by examining models wherein AI contributes to increased output production, possibly through heightened substitutability of capital for labor or the automation of tasks. This reflects the concept that AI enables capital to “self-replicate,” leading to accelerated growth and a reduction in the labor share. Subsequently, models are explored in which AI enhances knowledge production, embodying the idea that AI facilitates capital “self-improvement,” thereby further expediting growth. Taken together, the literature implies that sufficiently advanced AI is likely to yield both of these effects.
Capital vs. Labour: the Effect of Income Sources on Attitudes Toward the Top 1 Percent
Oscar Barrera-Rodriguez, Emmanuel Chavez
Does the perception of income of the top 1% earners change if information on the nature of this income is presented? This is the question addressed in this new World Inequality Lab working paper. The authors conducted a randomized online survey with 2000 French respondents to examine the impact of presenting information on the income of the top 1% earners on attitudes towards this group. The focus is specifically on the income derived from capital and labor at the top, a facet that has received limited attention in previous literature. The findings indicate that initially, respondents tend to overestimate the income of the top 1%, lack clear priors on their capital vs. labor shares, and express a desire for them to pay a higher income tax rate than the current one. It also indicates that the provision of quantitative information about the income sources at the top consistently shifts attitudes toward the rich to the unfavorable end of the spectrum.
Monetary architecture and the Green Transition
Steffen Murau, Armin Haas, Andrei Guter-Sandu
The question of how to finance the Green Transition toward net-zero carbon emissions remains open. A new paper contributes to the existing literature through the development of a ‘Monetary Architecture’ framework. The authors conceptualize the monetary and financial system as a constantly evolving and historically specific hierarchical web of interlocking balance sheets. Using the United States as a case study, the emphasis is placed on a systemic financing dimension that leverages all available elasticity space in the monetary architecture. This involves a division of labor between “firefighting” balance sheets, such as central banks or treasuries, and “workhorse” balance sheets, such as off-balance-sheet fiscal agencies or shadow banks. The authors suggest that public workhorse balance sheets should initiate a balance sheet expansion, subsequently engaging the rest of the monetary architecture—particularly shadow banks—for long-term funding. Firefighting entities should play a role in preventing systemic instability and managing any potential final contraction.