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Wealth and Income Inequalities ← → r > g

Author

Listed:
  • Yannick Malevergne

    (Université Paris)

  • Didier Sornette

    (ETH Zurich and Swiss Finance Institute)

Abstract
Piketty’s Capital in the Twenty-First Century posits the return r on capital to be larger than the economic growth rate g as a main driver of inequalities. This article points out the circumstances under which the reverse inference holds. We show that increasing inequality promotes increasing gap r-g, and vice-versa, because capital is a cumulative quantity that claims a finite fraction of the total output in the presence of fractional consumption of the return on capital. However economies do exist for which large inequalities tend to curb r-g, thus proving that r > g does not always lead to an endless inequality spiral.

Suggested Citation

  • Yannick Malevergne & Didier Sornette, 2016. "Wealth and Income Inequalities ← → r > g," Swiss Finance Institute Research Paper Series 16-69, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1669
    as

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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2878645
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    inequality; return on capital; growth rate; labor; national output; demographics;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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