Capital is Back: Wealth-Income Ratios in Rich Countries, 1700-2010

Thomas Piketty and Gabriel Zucman

No 9588, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How do aggregate wealth-to-income ratios evolve in the long run and why? We address this question using 1970-2010 national balance sheets recently compiled in the top eight developed economies. For the U.S., U.K., Germany, and France, we are able to extend our analysis as far back as 1700. We find in every country a gradual rise of wealth-income ratios in recent decades, from about 200-300% in 1970 to 400-600% in 2010. In effect, today's ratios appear to be returning to the high values observed in Europe in the eighteenth and nineteenth centuries (600-700%). This can be explained by a long run asset price recovery (itself driven by changes in capital policies since the world wars) and by the slowdown of productivity and population growth, in line with the β=s/g Harrod-Domar-Solow formula. That is, for a given net saving rate s= 10%, the long run wealth-income ratio β is about 300% if g= 3% and 600% if g= 1.5%. Our results have important implications for capital taxation and regulation and shed new light on the changing nature of wealth, the shape of the production function, and the rise of capital shares.

Keywords: Capital; Income; Saving; Wealth (search for similar items in EconPapers)
JEL-codes: E21 E22 E25 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-his and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (121)

Downloads: (external link)
https://cepr.org/publications/DP9588 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010 (2014)
Working Paper: Capital is back: wealth-income ratios in rich countries 1700-2010 (2014)
Working Paper: Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010 (2014)
Working Paper: Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010 (2014)
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:cpr:ceprdp:9588

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP9588

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().