Working Paper: NBER ID: w21730
Authors: Mariacristina De Nardi; Giulio Fella; Fang Yang
Abstract: Piketty's book, Capital in the Twenty-First Century, discusses several factors affecting wealth inequality: rates of return on capital, output growth rates, tax progressivity, top income shares, and heterogeneity in saving rates and inheritances. This paper studies the role of various forces affecting savings in quantitative models of wealth inequality, discusses their successes and failures in accounting for the observed facts, and compares these model's implications with Piketty's conclusions.
Keywords: Wealth Inequality; Saving Behavior; Capital Returns
JEL Codes: D14; E21; H2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| post-tax rate of return on capital (r) (D33) | wealth concentration (D31) |
| rate of aggregate output growth (g) (O40) | wealth concentration (D31) |
| post-tax rate of return on capital (r) (D33) | capitalization of existing wealth (P12) |
| rate of aggregate output growth (g) (O40) | accumulation of new wealth through labor income (E25) |
| multiplicative random shocks to wealth accumulation processes (G59) | wealth concentration (D31) |
| inheritance (H24) | wealth inequality (D31) |
| heterogeneity in saving rates (D14) | wealth inequality (D31) |
| rise of high-level managers (supermanagers) (M54) | wealth inequality (D31) |