TY - JOUR
T1 - Left behind
T2 - Creative destruction, inequality, and the stock market
AU - Kogan, Leonid
AU - Papanikolaou, Dimitris
AU - Stoffman, Noah
N1 - Funding Information:
We thank Andrew Abel, Hengjie Ai, Federico Belo, Jaroslav Borovička, John Campbell, Ian Dew-Becker, Bernard Dumas, Andrea Eisfeldt, Carola Frydman, Joao Gomes, Lars Hansen, Boyan Jovanovic, Erik Loualiche, Deborah Lucas, Gregor Matvos, Stavros Panageas, Jonathan Parker, Monika Piazzesi, Nick Roussanov, Martin Schneider, Amit Seru, and Costis Skiadas as well as seminar participants at American Economic Association, Baruch College, the BI Production–based asset pricing workshop, Boston University, Catolica, Chicago Booth, Chicago Institute for Theoretical Economics, Columbia Graduate Business School, Copenhagen Business School, Chinese University of Hong Kong, Emory, Erasmus University, Georgetown University, Georgia Institute of Technology, École des Hautes Études Commerciales de Paris, Hong Kong University of Science and Technology, Institut Européen d’Administration des Affaires, Jackson Hole Finance Conference, London Business School, London School of Economics, McGill University, Monash University, Massachusetts Institute of Technology Sloan, National Bureau of Economic Research Asset Pricing meeting, New York Federal Reserve Bank, Northwestern University, Rice University, Society of Economic Dynamics, Stockholm School of Economics, Tinbergen Institute, University of California, Berkeley, University of California, Los Angeles, University of Hong Kong, University of Illinois at Chicago, Universidad de San Andres, Universidad Torcuato Di Tella, University of Connecticut, University of Geneva, Indiana University, University of Lausanne, University of Lugano, University of New South Wales, University of Rochester, University of Sydney, University of Technology Sydney, University of Washington, University of Southern California, Washington University, Western Finance Association, and Wharton for valuable discussions and comments. Dimitris Papanikolaou thanks Amazon (Amazon Web Services in Education Grant award), the Zell Center for Risk, and the Jerome Kenney Fund for research support. Data are provided as supplementary material online.
Funding Information:
Parker, Monika Piazzesi, Nick Roussanov, Martin Schneider, Amit Seru, and Costis Skiadas as well as seminar participants at American Economic Association, Baruch College, the BI Production–based asset pricing workshop, Boston University, Catolica, Chicago Booth, Chicago Institute for Theoretical Economics, Columbia Graduate Business School, Copenhagen Business School, Chinese University of Hong Kong, Emory, Erasmus University, Georgetown University, Georgia Institute of Technology, École des Hautes Études Commerciales de Paris, Hong Kong University of Science and Technology, Institut Européen d’Administration des Affaires, Jackson Hole Finance Conference, London Business School, London School of Economics, McGill University, Monash University, Massachusetts Institute of Technology Sloan, National Bureau of Economic Research Asset Pricing meeting, New York Federal Reserve Bank, Northwestern University, Rice University, Society of Economic Dynamics, Stockholm School of Economics, Tinbergen Institute, University of California, Berkeley, University of California, Los Angeles, University of Hong Kong, University of Illinois at Chicago, Univer-sidad de San Andres, Universidad Torcuato Di Tella, University of Connecticut, University of Geneva, Indiana University, University of Lausanne, University of Lugano, University of New South Wales, University of Rochester, University of Sydney, University of Technology Sydney, University of Washington, University of Southern California, Washington University, Western Finance Association, and Wharton for valuable discussions and comments. Dimitris Papani-kolaou thanks Amazon (Amazon Web Services in Education Grant award), the Zell Center for Risk, and the Jerome Kenney Fund for research support. Data are provided as supplementary material online 1 Berndt (1990, 71) gives the following definitions for these two types of technology shocks: “Embodied technical progress refers to engineering design and performance advances that can only be embodied in new plant or equipment; older equipment cannot be made to function as economically as the new, unless a costly remodelling or retrofitting of equipment occurs”; and “By contrast, disembodied technical progress refers to advances in knowledge that make more effective use of all inputs, including capital of each surviving vintage (not just the most recent vintage). In its pure form, disembodied technical progress proceeds independently of the vintage structure of the capital stock. The most common example of disembodied technical progress is perhaps the notion of learning curves, in which it has been found that for a wide variety of production processes and products, as cumulative experience and production increase, learning occurs which results in ever decreasing unit costs.”
Publisher Copyright:
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PY - 2020/3/1
Y1 - 2020/3/1
N2 - We develop a general equilibrium model of asset prices in which benefits of technological innovation are distributed asymmetrically. Financial market participants do not capture all economic gains from innovation even when they own shares in innovating firms. Such gains accrue partly to the innovators, who cannot sell claims on proceeds from their future ideas. We show how the resulting inequality among agents can give rise to a high risk premium on the aggregate stock market, return comovement and average return differences among firms, and the failure of traditional representative agent asset pricing models to account for cross-sectional differences in risk premia.
AB - We develop a general equilibrium model of asset prices in which benefits of technological innovation are distributed asymmetrically. Financial market participants do not capture all economic gains from innovation even when they own shares in innovating firms. Such gains accrue partly to the innovators, who cannot sell claims on proceeds from their future ideas. We show how the resulting inequality among agents can give rise to a high risk premium on the aggregate stock market, return comovement and average return differences among firms, and the failure of traditional representative agent asset pricing models to account for cross-sectional differences in risk premia.
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U2 - 10.1086/704619
DO - 10.1086/704619
M3 - Article
AN - SCOPUS:85080087586
SN - 0022-3808
VL - 128
SP - 855
EP - 906
JO - Journal of Political Economy
JF - Journal of Political Economy
IS - 3
ER -
