A Gordon growth formula for wealth-income ratios and its implications on cross-country differences

Daehwan Kim and Jeffrey Nilsen

Finance Research Letters, 2023, vol. 58, issue PD

Abstract: We present a Gordon-growth-model-based formula for wealth-income ratios and empirically examine its implications on long-run cross-country differences in wealth-income ratios. Firstly, we find that wealth-income ratios have a negative cross-country correlation with saving rates, contrary to the conventional understanding of the relationship as posited by Piketty and Zucman (2014). Secondly, we find that the labor share of income contributes significantly to cross-country variation in wealth-income ratios.

Keywords: Wealth-income ratios; Gordon growth model; Cross-country differences; Correlation between wealth-income ratios and saving rates; Labor share (search for similar items in EconPapers)
JEL-codes: D33 E21 G10 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009819

DOI: 10.1016/j.frl.2023.104609

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