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Long-Term Rates, Capital Shares, and Income Inequality

Author

Listed:
  • Edmond Berisha

    (Montclair State University)

  • John Meszaros

    (U.S. Postal Service)

Abstract

Using Piketty and Zucman’s (Q J Econ 129(3):1255-1310, 2014) recently published capital share data, this paper uses structural VARs to understand the relationship between long-term interest rates, capital shares, and the distribution of income in the United States. The results indicate that increases in capital shares increase income inequality. Moreover, the relationship between the interest rate and capital shares is found to be negative and statistically significant. The results suggest that low long-term rates, through an equity and business investment channel, further increase the unequal distribution of income in the U.S. The results further illuminate the channels through which monetary policy can potentially affect the distribution of income.

Suggested Citation

  • Edmond Berisha & John Meszaros, 2020. "Long-Term Rates, Capital Shares, and Income Inequality," Open Economies Review, Springer, vol. 31(3), pages 619-635, July.
    • Handle: RePEc:kap:openec:v:31:y:2020:i:3:d:10.1007_s11079-019-09539-5
    DOI: 10.1007/s11079-019-09539-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Income inequality; Monetary policy; Macroeconomic policy;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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