Wealth and Income Inequalities ← → r > g

Yannick Malevergne and Didier Sornette
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Didier Sornette: ETH Zurich and Swiss Finance Institute

No 16-69, Swiss Finance Institute Research Paper Series from 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.

Keywords: inequality; return on capital; growth rate; labor; national output; demographics (search for similar items in EconPapers)
JEL-codes: D63 E00 E22 P10 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2016-11
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1669

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