WEALTH INEQUALITY, OR r – g, IN THE ECONOMIC GROWTH MODEL

Ryoji Hiraguchi

Macroeconomic Dynamics, 2019, vol. 23, issue 2, 479-488

Abstract: I investigate a simple continuous-time overlapping generations model with a neoclassical production function. I demonstrate that the degree of wealth inequality is positively related to the difference between the real interest rate r and the growth rate of income g, and if g falls, the r – g gap widens and inequality worsens. I also argue that a wealth tax reduces the wealth inequality. All these results are consistent with the famous predictions advanced by Thomas Piketty in Capital in the Twenty-First Century (2014).

Date: 2019
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