Business Political Capacity and the Top-Heavy Rise in Income Inequality: How Large an Impact?

I don’t address the fourth arena: industrial relations. This has a peculiar analytical status in the article in that the argument applies to neither step in the hypothesized causal chain. It is an attempt, instead, to explain the rise in business’s (relative) political capacity.

"Special Report on Executive Pay," The Economist, January 20, 2007, 8.

Lucian Bebchuk and Yaniv Grinstein, "The Growth of Executive Pay" (Working Paper 11443, National Bureau of Economic Research, 2005), available at www.nber.org, table 4; "Special Report on Executive Pay"; Thomas A. DiPrete, Greg Eirich, and Matthew Pittinsky, "Compensation Benchmarking, Leapfrogs, and the Surge in Executive Pay" (unpublished, Columbia University, 2008), figure 1.

Jacob S. Hacker and Paul Pierson , "Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States," Politics & Society 38 (2010): 152-204.

David Vogel , Fluctuating Fortunes: The Political Power of Business in America ( New York: Basic Books, 1989).

Lane Kenworthy , In Search of National Economic Success (Thousand Oaks, CA: Sage, 1995), chap. 1.

Michael C. Jensen and Kevin J. Murphy , "CEO Incentives-It’s Not How Much You Pay, but How," Harvard Business Review, May-June 1990, 138-49; Robert Reich, Supercapitalism (New York : Knopf, 2007).

Robert H. Frank and Philip J. Cook , The Winner-Take-All Society (New York: Penguin, 1995); Reich, Supercapitalism.

Keith Epstein and Eamon Javers , "How Bill Clinton Helped Boost CEO Pay ," Business Week, November 27, 2006.

Arantxa Jarque , "CEO Compensation: Trends, Market Changes, and Regulation," Federal Reserve Bank of Richmond Economic Quarterly 94 (2008): 265-300; Paul Weinstein, Jr. , "Curb Executive Pay-The Right Way," New York Daily News, August 12, 2009.

Carola Frydman and Raven E. Saks, "Executive Compensation: A New View from a Long-Term Perspective, 1936-2005" (Working Paper 14145, National Bureau of Economic Research, 2008), available at www.nber.org, figure 5; Xavier Gabaix and Augustin Landier, "Why Has CEO Pay Increased So Much?" Quarterly Journal of Economics (2008): 49-100; Jarque, "CEO Compensation," figure 2.

Frank and Cook, Winner-Take-All Society, chap. 4; "Special Report on Executive Pay."

Kevin J. Murphy , "Executive Compensation," in Handbook of Labor Economics, vol. 3B, ed. Orley Ashenfelter and David Card (Amsterdam: North Holland, 1999); DiPrete, Eirich , and Pittinsky , "Compensation Benchmarking."

Guido Ferrarini and Niamh Moloney , "Executive Remuneration in the EU: The Context for Reform" (Working Paper 32, EGGI Working Paper Series in Law, European Corporate Governance Institute, 2007).

Arthur Levitt , with Paula Dwyer , Take on the Street ( New York: Pantheon, 2002), 109-10.

Yi Feng and Yisong S. Tian , "Option Expensing and Executive Compensation," 2007, available at papers.ssrn.com/sol3/papers.cfm?abstractid=970662, 7.

Jacob S. Hacker and Paul Pierson , "Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States," Politics & Society 38 (2010): 152-204.

Ibid.

Thomas Philippon and Ariell Reshef , "Wages and Human Capital in the U.S. Financial Industry: 1909-2006" (Working Paper 14644, National Bureau of Economic Research, 2009), available at www.nber.org.

Michael J. Mandel , "The New Economy," BusinessWeek , January 31, 2000; Jeff Madrick , "The Business Media and the New Economy" (Research Paper R-24, Shorenstein Center on the Press, Politics, and Public Policy, Kennedy School of Government, Harvard University, 2001).

Lawrence Mishel , Jared Bernstein , and Heidi Shierholz , The State of Working America 2008-2009 (Ithaca, NY: ILR Press, 2009).

Gillian Tett , Fool’s Gold (New York: Free Press, 2009).

Ibid.

Hacker and Pierson, "Winner-Take-All Politics"; Thomas Piketty and Emmanuel Saez, "How Progressive Is the U.S. Federal Tax System?" Journal of Economic Perspectives 21, no. 1 (2007): 3-24.

Lane Kenworthy , "How Much Do Presidents Influence Income Inequality?" Challenge 53 (2010): 90-112, figure 11.

Hacker and Pierson mention some pre-Reagan tax cuts, such as a reduction in the capital gains rate enacted in the late 1970s. And their Figure 5, using data from Piketty and Saez, suggests large declines in the effective tax rates for the richest 0.01 percent and 0.1 percent in the late 1970s. However, that graph shows no decline in the rate for the richest 1 percent prior to the early 1980s. This means the effective rate on those in the top 1 percent but below the top 0.1 percent must have increased. So the tax changes in the late 1970s seem to have resulted in redistribution within the top 1 percent.

Isaac William Martin , The Permanent Tax Revolt (Stanford, CA: Stanford University Press, 2008), 128-32.

Sean Wilentz , The Age of Reagan (New York: HarperCollins , 2008), chap. 5.

Cathie Jo Martin , "Business Influence and State Power: The Case of U.S. Corporate Tax Policy," Politics & Society 17 (1989): 189-223.

Martin, The Permanent Tax Revolt, chap. 6.

Thomas B. Edsall , Building Red America (New York: Basic Books, 2006).

Jacob S. Hacker and Paul Pierson , Off Center (New Haven, CT: Yale University Press, 2005), chap. 2.