Working Paper: NBER ID: w20742
Authors: Charles I. Jones
Abstract: Since the early 2000s, research by Thomas Piketty, Emmanuel Saez, and their coathors has revolutionized our understanding of income and wealth inequality. In this paper, I highlight some of the key empirical facts from this research and comment on how they relate to macroeconomics and to economic theory more generally. One of the key links between data and theory is the Pareto distribution. The paper describes simple mechanisms that give rise to Pareto distributions for income and wealth and considers the economic forces that influence top inequality over time and across countries. For example, it is in this context that the role of the famous r-g expression is best understood.
Keywords: No keywords provided
JEL Codes: E0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| share of income going to the top 1% (D33) | parameter 'α' of the Pareto distribution (C46) |
| r (Y60) | top wealth inequality (D31) |
| g (Y60) | top wealth inequality (D31) |
| parameter 'α' of the Pareto distribution (C46) | top income shares (D33) |
| economic forces influencing parameter 'α' (P42) | change over time and differ across countries (O57) |