The Great Leveler According to HANK

Ralph Luetticke, Timothy Meyer, Gernot Müller and Moritz Schularick

No 12276, CESifo Working Paper Series from CESifo

Abstract: Using historical income and wealth data, we show that war reduces inequality: the top-1% income share falls by 20% and the top-1% wealth share by 10%. We measure three key drivers of inequality - capital destruction, taxation, and inflation - in the data and quantify their role with a Heterogeneous Agent New Keynesian (HANK) model. Destruction depresses profits and thus top incomes. Taxation primarily influences wealth dynamics, while inflation has little effect on top shares, but reduces indebtedness among poorer households. We validate our findings using new data on inequality across German towns in World War 2 and cross-country data on profits.

Keywords: interstate wars; inequality; income share; wealth share (search for similar items in EconPapers)
JEL-codes: E50 F40 F50 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-dge
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ifo.de/DocDL/cesifo1_wp12276.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12276

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().