Rising Income Inequality and the Impact of r‐g$$ r\hbox{-} g $$ in the United States

Antonio Abatemarco, Elena Lagomarsino and Alessandro Spiganti

Review of Income and Wealth, 2025, vol. 71, issue 1

Abstract: This paper proposes a novel non‐parametric strategy to test ‘Piketty's third law,' postulating that a positive gap between the rate of return on capital (r$$ r $$) and the economy's growth rate (g$$ g $$) is associated with increased income inequality. The strategy is based on a decomposition of inequality changes over time that allows investigating the existence of a distributive effect of the r−g$$ r-g $$ gap and its relative importance with respect to other drivers of income inequality changes over time. Applying this strategy to data from the Panel Study of Income Dynamics on the last 50 years, we find support for the existence of Piketty's law in the evolution of income inequality in the United States. Whereas factors other than Piketty's income dynamics predominantly drive overall inequality, the r−g$$ r-g $$ gap accounts for approximately 10% of the trend in income inequality in the medium‐ and long‐term.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/roiw.70000

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:bla:revinw:v:71:y:2025:i:1:n:e70000

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0034-6586

Access Statistics for this article

Review of Income and Wealth is currently edited by Conchita D'Ambrosio and Robert J. Hill

More articles in Review of Income and Wealth from International Association for Research in Income and Wealth Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().