EAGER: Finance Sector Income Distribution Dynamics: An Application and Test of Rent Theory

University Of Massachusetts Amherst, Amherst MA

Investigators

Abstract

EAGER: Finance Sector Income Distribution Dynamics: An Application and Test of Rent Theory Using Current Population Survey and National Income and Product Accounts data this project examines the employment and income distribution consequences of finance sector deregulation, the stock market and real estate bubbles of the 2000s, and their subsequent collapse. Theoretically the project approaches the accumulation of income in the finance sector as an example of economic rent creation and the collapse of the financial bubble as a potential moment of rent destruction. Empirically the project examines the distribution of income from this rent accumulation process to owners and employees, and among employees by region, occupation, education, sex and race. Particularly interesting is documenting which industries lose the most as a result of the financial collapse and if there is continuing evidence of post-crisis rents relative to the rest of the economy. The intellectual contribution to the project is to sociological theory of income rents and rent destruction and to document long term income trends in the finance sector. Rent theory has typically been used post hoc to explain wage distributions. The current financial collapse, following increased incomes associated with both the financial and real estate bubbles and long term institutional power in the securities industry, allow a much more dynamic, contextualized and precise set of hypotheses to be examined. The broader impact of the project will be to inform policy discussions of finance sector regulatory reform, tax and income policy.