In addition to analysing the monetary transmission mechanism, the continuous-time solution techniques Benjamin pioneered can be used to study a wide range of economic questions. For example, Benjamin and his co-authors2 recently investigated which theories can explain the substantial rise in inequality in the top tail of the US income distribution in the 1980s and 1990s.
While most established theories have difficulties in accounting for this development, theories allowing for “superstar” phenomena are consistent with it. Superstar phenomena arise, for example, when changes in technology make it possible for entrepreneurs or managers who are a little better than others at any given task to capture a much higher share of the market and of income.