 Secular Increase in Economic Inequality Accompanying a Constant Output/Capital RatioMPRA Paper from University Library of Munich, Germany Abstract: Many empirical studies have concluded that the level of economic inequality has increased in many countries since the mid-twentieth century, but the output/capital ratio has barely changed during the same period. This secular increase in economic inequality indicates the existence of some essential heterogeneity among households. In this paper, I attempt to uncover this essential heterogeneity by focusing on rate of time preference (RTP) and persistent economic rents. I find that if heterogeneous RTP were the cause behind the observed secular increase in economic inequality, it could not coexist with a constant output/capital ratio. On the other hand, I find that heterogeneous persistent economic rent can coexist simultaneously with both phenomena and consider it the most likely the cause behind the increase in economic inequality accompanied by a constant output/capital ratio. I support this conclusion with both a theoretical analysis and numerical examinations. Keywords: Output/capital ratio, Heterogeneity, Inequality; Rents, Time preference (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:117705 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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