Rising wealth inequality: when r − g matters

The rise and decline of general laws of capitalism

Hoang Khieu

Oxford Economic Papers, 2022, vol. 74, issue 2, 333-358

Abstract: We investigate the effects of the gap between the rate of return on wealth and the growth rate, r − g, on wealth inequality using a model of inherited wealth and productivity inheritance featuring heterogeneity in labor income and in the death rate. The heterogeneity in the death rate implies different health types, which imply type dependence and scale dependence. Labor income heterogeneity implies a U-shaped effect of r − g on wealth inequality. Long-run wealth inequality increases in r − g if the distribution of the death rate features good-health types and if r − g is sufficiently larger than a positive threshold, which is increasing the dispersion of labor income. The share of good-health types and the r − g’s threshold in the Survey of Consumer Finances are 31.8% and 4.5%, respectively.

JEL-codes: C02 D31 E21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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