Article
Assessing Piketty's second laws of capitalism
Oxford Economic Papers
(2018)
Abstract
This paper assesses Piketty’s second fundamental law of capitalism to investigate patterns and determinants of wealth inequality over the last century and a half. We first discuss the foundations of this theory on the basis of the most popular growth models, and then perform a long-run regression analysis of wealth inequality using Piketty and Zucman’s data and a new historical data set for the OECD countries covering the period since 1870 onwards. We find that the wealth-to-income ratio, β, is significantly related to the ratio between the saving rate, s, and the rate of income growth, g. The estimated coefficient for the s/g ratio ranges from 0.05 to 0.18, depending on the specification, while the theory predicts a unitary value. It is also shown that the wealth-to-income ratio responds to the variations in income growth much more than to variations in the saving rate.
Disciplines
Publication Date
2018
Citation Information
Jakob Madsen, Antonio Minniti and Francesco Venturini. "Assessing Piketty's second laws of capitalism" Oxford Economic Papers Vol. 70 Iss. 1 (2018) p. 1 - 21 Available at: http://works.bepress.com/francesco_venturini/44/