Inherited vs self-made wealth: theory & evidence from a rentier society (Paris 1872-1937)

Gilles Postel-Vinay, Thomas Piketty and Jean-Laurent Rosenthal

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper divides the population into two groups: the "inheritors" or "rentiers" (whose wealth is smaller than the capitalized value of their inherited wealth, i.e. who consumed more than their labor income during their lifetime); and the "savers" or "self-made men" (whose wealth is larger than the capitalized value of their inherited wealth, i.e. who consumed less than their labor income). Applying this simple theoretical model to a unique micro data set on inheritance and matrimonial property regimes, we find that Paris in 1872-1937 looks like a prototype "rentier society". Rentiers made about 10% of the population of Parisians but owned 70% of aggregate wealth. Rentier societies thrive when the rate of return on private wealth r is permanently and substantially larger than the growth rate g (say, r=4%-5% vs g=1%-2%). This was the case in the 19th century and early 20th century and is likely to happen again in the 21st century. In such cases top successors, by consuming part of the return to their inherited wealth, can sustain living standards far beyond what labor income alone would permit.

Keywords: inheritance; wealth accumulation; wealth distribution (search for similar items in EconPapers)
JEL-codes: D30 D60 E10 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2011-06-06
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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http://eprints.lse.ac.uk/39639/ Open access version. (application/pdf)

Related works:
Working Paper: Inherited vs Self-Made Wealth: Theory & Evidence from a Rentier Society (Paris 1872-1937) (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:39639

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