Working Paper: CEPR ID: DP10072
Authors: Thomas Piketty; Gabriel Zucman
Abstract: This article offers an overview of the empirical and theoretical research on the long run evolution of wealth and inheritance. Wealth-income ratios, inherited wealth, and wealth inequalities were high in the 18th-19th centuries up untilWorldWar 1, then sharply dropped during the 20th century following World War shocks, and have been rising again in the late 20th and early 21st centuries. We discuss the models that can account for these facts. We show that over a wide range of models, the long run magnitude and concentration of wealth and inheritance are an increasing function of r ? g, where r is the net-of-tax rate of return on wealth and g is the economy's growth rate. This suggests that current trends toward rising wealth-income ratios and wealth inequality might continue during the 21st century, both because of the slowdown of population and productivity growth, and because of rising international competition to attract capital.
Keywords: distribution; income; wealth
JEL Codes: H00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| growth rate of the economy (g) (O40) | magnitude and concentration of wealth and inheritance (D31) |
| net-of-tax rate of return on wealth (r) (G19) | magnitude and concentration of wealth and inheritance (D31) |
| growth rate of the economy (g) decreases (E20) | wealth concentration increases (D31) |
| net-of-tax rate of return on wealth (r) increases (G19) | wealth concentration increases (D31) |
| significant historical shocks (e.g., wars) (N43) | wealth accumulation (E21) |