Working Paper: CEPR ID: DP2876
Authors: Thomas Piketty
Abstract: The objective of this research is to document and to explain trends in inequality in 20th century France. Data from income tax returns (1915-98), wage tax returns (1919-98) and inheritance tax returns (1902-94), is used in order to compute fully homogeneous, yearly estimates of income inequality, wage inequality and wealth inequality. The main conclusion is that the decline in income inequality that took place during the first half of the 20th century was mostly accidental. In France and possibly in a number of other developed countries as well wage inequality has actually been extremely stable in the long run, and the secular decline in income inequality is for the most part a capital income phenomenon. Holders of very large fortunes were severely hit by major shocks during the 1914-45 period, and were never able to fully recover from these shocks, probably because of the dynamic effects of progressive taxation on capital accumulation and pre-tax income inequality.
Keywords: Capital accumulation; Income distribution; Wage distribution
JEL Codes: D63; E25; N34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital income shocks (E25) | decline in income inequality (D31) |
| progressive taxation (H29) | decline in income inequality (D31) |
| capital income shocks + progressive taxation (H31) | decline in capital income concentration (E25) |
| decline in capital income concentration (E25) | decline in income inequality (D31) |
| stable wage inequality (J31) | decline in income inequality (D31) |
| top 1% income share decrease (E25) | decline in income inequality (D31) |
| average income of top 0.01% stable (D31) | decline in income inequality (D31) |