Information Rents, Economic Growth and Inequality: An Empirical Study of the United States

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Rotta, Tomas. 2022. Information Rents, Economic Growth and Inequality: An Empirical Study of the United States. Cambridge Journal of Economics, 46(2), pp. 341-370. ISSN 0309-166X [Article]

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Official URL: https://doi.org/10.1093/cje/beac004

Abstract or Description

In this paper I estimate the impact of unproductive activities on economic growth, labour productivity and income inequality in the United States from 1947 to 2011. Productive activities directly create value, while unproductive activities do not. I develop a new methodology to compute the growth of productive and unproductive activities in terms of flows of income and stocks of fixed assets using input-output matrices and national income accounts. A core feature of my methodology is the notion that the commodification of knowledge and information gives rise to ‘information rents’. Information rents are, as I demonstrate, a determinant factor of growth and distribution. I find that unproductive activities have a net positive effect on economic growth and labour productivity, but at the price of increasing income inequality. Unproductive activities that rely on information rents, in particular, have increased income inequality and slowed down value-added growth despite their positive contribution to labour productivity. Information rents have drawn too much value from productive activities and benefitted the top income earners.

Item Type:

Article

Identification Number (DOI):

https://doi.org/10.1093/cje/beac004

Additional Information:

JEL Codes: B51; E11; O47

This is a pre-copyedited, author-produced version of an article accepted for publication in the Cambridge Journal of Economics following peer review. The version of record is available online at: https://doi.org/10.1093/cje/beac004.

Keywords:

Unproductive Activity, Information Rents, Growth and Distribution, Inequality, Time Series Econometrics

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