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Capital is Back: Wealth-Income Ratios in Rich Countries, 1700-2010

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  • Piketty, Thomas
  • Zucman, Gabriel

Abstract

How do aggregate wealth-to-income ratios evolve in the long run and why? We address this question using 1970-2010 national balance sheets recently compiled in the top eight developed economies. For the U.S., U.K., Germany, and France, we are able to extend our analysis as far back as 1700. We find in every country a gradual rise of wealth-income ratios in recent decades, from about 200-300% in 1970 to 400-600% in 2010. In effect, today's ratios appear to be returning to the high values observed in Europe in the eighteenth and nineteenth centuries (600-700%). This can be explained by a long run asset price recovery (itself driven by changes in capital policies since the world wars) and by the slowdown of productivity and population growth, in line with the β=s/g Harrod-Domar-Solow formula. That is, for a given net saving rate s= 10%, the long run wealth-income ratio β is about 300% if g= 3% and 600% if g= 1.5%. Our results have important implications for capital taxation and regulation and shed new light on the changing nature of wealth, the shape of the production function, and the rise of capital shares.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9588.

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Date of creation: Aug 2013
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Handle: RePEc:cpr:ceprdp:9588

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Keywords: Capital; Income; Saving; Wealth;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Capital is Back: Wealth Ratios over Several Centuries
    by noreply@blogger.com (Carola Binder) in Quantitative Ease on 2013-09-09 22:54:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Linus Mattauch & Ottmar Edenhofer & David Klenert & Sophie Bénard, 2014. "Public Investment when Capital is Back - Distributional Effects of Heterogeneous Saving Behavior," CESifo Working Paper Series 4714, CESifo Group Munich.
  2. Maito, Esteban Ezequiel, 2014. "Piketty against Piketty: the tendency of the rate of profit to fall in United Kingdom and Germany since XIX century confirmed by Piketty´s data," MPRA Paper 55839, University Library of Munich, Germany.
  3. Raymundo M. Campos-Vazquez & Emmanuel Chavez & Gerardo Esquivel, 2013. "Growth is (really) good for the (really) rich," Serie documentos de trabajo del Centro de Estudios Económicos 2013-09, El Colegio de México, Centro de Estudios Económicos.
  4. Jenderny, Katharina, 2013. "Declining Tax Progression and the German Dual Income Tax," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80039, Verein für Socialpolitik / German Economic Association.
  5. De Donder, Philippe & Pestieau, Pierre, 2013. "Lobbying, family concerns and the lack of political support for estate taxation," IDEI Working Papers 811, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Cecilia Garcia-Peñalosa & Stephen Turnovsky, 2013. "Income Inequality, Mobility and the Accumulation of Capital," CESifo Working Paper Series 4559, CESifo Group Munich.
  7. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," NBER Working Papers 19075, National Bureau of Economic Research, Inc.
  8. Nicola Gennaioli & Andrei Shleifer & Robert W. Vishny, 2013. "Finance and the Preservation of Wealth," NBER Working Papers 19117, National Bureau of Economic Research, Inc.
  9. Godar, Sarah & Paetz, Christoph & Truger, Achim, 2014. "Progressive tax reform in OECD countries : perspectives and obstacles," ILO Working Papers 485510, International Labour Organization.
  10. repec:hal:wpaper:halshs-00844446 is not listed on IDEAS
  11. Julia Cagé & Valeria Rueda, 2013. "The long Term Effects of the Printing Press in Sub Saharan Africa," PSE Working Papers halshs-00844446, HAL.
  12. Kohler, Pierre, 2014. "Asset-Centred Redistributive Policies for Sustainable Development," MPRA Paper 55357, University Library of Munich, Germany.
  13. Maito, Esteban Ezequiel, 2014. "The historical transience of capital: the downward trend in the rate of profit since XIX century," MPRA Paper 55894, University Library of Munich, Germany.
  14. Morten Olsen & David Hemous, 2014. "The Rise of the Machines: Automation, Horizontal Innovation and Income Inequality," 2014 Meeting Papers 162, Society for Economic Dynamics.

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