Does r-g cause wealth inequality? The case of the United States/¿La r-g causa la desigualdad de la riqueza? El caso de Estados Unidos

David Strauss and Daniel Ventosa-Santaulària
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David Strauss: Centro de Investigación y Docencia Económicas

Estudios Económicos, 2023, vol. 38, issue 2, 183-224

Abstract: Piketty claims that the gap between the return to capital and the growth rate (r−g) governs the evolution of wealth inequality. This paper assesses its empirical validity using an IV approach and almost one century of US data. Our results are twofold: First, wealth shares are nonstationary, necessitating first differences to draw a valid inference from any econometric exercise. This is consistent with Piketty’s line of argumentation and casts doubt on studies on inequality that use inequality levels without showing the trending behavior of the data. Second, r−g played a significant role in the evolution of wealth inequality over the last century, both statistically and economically. In particular, r−g can explain over 50% of the increase in wealth inequality since the late 1970s.

Keywords: wealth inequality; r-g; Piketty; capital (search for similar items in EconPapers)
JEL-codes: E44 O11 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:emx:esteco:v:38:y:2023:i:2:p:183-224

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