In a recent CEPR paper, Thomas Piketty and Gabriel Zucman trace the evolution of wealth-to-income ratios for several countries. Click here for VOX coverage of their article. They find that wealth-to-income ratios have increased since 1945 and that they are back to levels last seen two hundred years ago. What are the implications of this? Piketty and Zucman suggest that this really matters for the future of wealth inequality and of inherited wealth in particular. In other words, unless there is internationally-coordinated progressive capital and inheritance taxation, wealth inequality is here to stay and the top 1% will consist of the offspring of the current top 1%. In other words, a new aristocracy is on the way!
Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...