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Wealth and income inequality in the long run

Philipp Lieberknecht and Philip Vermeulen

No 2022-02, Working Papers from Auckland University of Technology, Department of Economics

Abstract: This paper analyses the joint long-run evolution of wealth and income inequality. We show that top wealth and income shares were cointegrated over the past century in France and the US. We rationalise this _nding using a two-agent version of the Solow growth model. In this framework, the co-movement of top wealth and income shares is determined by the relative saving rate at the top, i.e. the ratio of the saving rate of rich individuals to the aggregate saving rate. The cointegration _nding suggests that relative saving rates at the top are fairly stable over time, thus explaining the tight co-movement between top wealth and income shares over the past century.

Keywords: income inequality; wealth inequality; top shares; savings rates; cointegration; error correction (search for similar items in EconPapers)
JEL-codes: D31 E21 E25 N32 N34 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-his and nep-mac
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