Working Paper: NBER ID: w21189
Authors: Joseph E. Stiglitz
Abstract: The paper identifies, and then resolves, a number of seeming puzzles in a newly identified set of stylized facts entailing movements in factor returns and shares and the wealth-income ratio. Standard data on savings cannot be reconciled with the increase in the wealth-income ratio: there is a wealth residual. An important component of this is associated with rents: land rents, exploitation rents, and returns on intellectual property. \n \nNor can these stylized facts be reconciled with a standard neoclassical model, focusing on labor and capital, even taking into account technological change (including skill-biased technological change), with appropriately defined aggregates. \nExplaining why the concepts of “capital” and “wealth” are distinct, we show that appropriately defined aggregates for wealth may be (and in the case of some countries appear to be) moving in opposite directions. \n \nWe identify some of the factors that may have contributed to the increase in rents and the divergence between wealth and capital. Subsequent Parts of this paper will investigate some of these factors in detail and relate them to changes in inequality.
Keywords: income distribution; wealth distribution; economic inequality; rents; capital income
JEL Codes: D31; E21; E22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in wealth-income ratio (D31) | increase in rents (R21) |
| increase in rents (R21) | increase in inequality (D31) |
| increase in technology (O33) | increase in rents (R21) |
| changes in policy (O24) | increase in rents (R21) |
| increase in wealth-income ratio (D31) | wealth residual linked to rents (D33) |
| increase in capital-output ratio (E22) | divergence in wealth distribution (D31) |