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Factor Income Distribution and Endogenous Economic Growth - When Piketty meets Romer -

Andreas Irmen () and Amer Tabakovic ()

Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: We scrutinize Thomas Piketty’s (2014) theory concerning the relationship between an economy’s long-run growth rate, its capital-income ratio, and its factor income distribution put forth in his recent book Capital in the Twenty-First Century. We find that a smaller long-run growth rate may be associated with a smaller capital-income ratio. Hence, Piketty’s Second Fundamental Law of Capitalism does not hold. However, in line with Piketty’s theory a smaller long-run growth rate goes together with a greater capital share. These findings obtain in variants of Romer’s (1990) seminal model of endogenous technological change. Here, both the economy’s savings rate and its growth rate are endogenous variables whereas in Piketty’s theory they are both exogenous parameters.

JEL-codes: E10 O33 E25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-his and nep-mac
Date: 2016
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Working Paper: Factor Income Distribution and Endogenous Economic Growth - When Piketty Meets Romer - (2016) Downloads
Working Paper: Factor Income Distribution and Endogenous Economic Growth - When Piketty meets Romer - (2016) Downloads
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