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This paper shows that the revolving door generates inequality of influence between financial firms and creates economic distortions. We first develop a theoretical model, introducing the notion of “bureaucratic capital” and stressing how the revolving door generates inequality in bureaucratic capital leading to inequality in profits. Then this prediction is tested, using a new database that tracks the revolving door process involving the 20 biggest US “diversified banks.” We show that regulators who supply a large stock of bureaucratic capital are more likely to be hired by the top five banks. We also develop indices of the inequality of influence between banks. We show that banks in the top revenue quintile concentrate around 80% of revolving door movements. Goldman Sachs appears as the prime beneficiary of this process, capturing approximately 30% of the total stock of bureaucratic capital.
Since the seminal work of Becker, the dynamics of endogenous fertility has been based on the trade-off faced by parents between the quantity and the quality of their children. However, in developing countries, where child labor is an indispensable source of household income, parents actually incur a negative cost by having an extra child, so that the trade-off disappears. The purpose of this paper is to restore the Beckerian quantity–quality trade-off when intergenerational transfers are upstream, in order to keep fertility endogenous. We do that by adding a negative “sibship size effect” on human capital formation to the standard Becker model. With a simple specification, we obtain multiplicity of steady states or, more fundamentally, the possibility of a jump from a state with high fertility and low income to a state with low fertility and high income, triggered by a continuous increase in the productivity of human capital formation.
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