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Pareto and Piketty: The Macroeconomics of Top Income and Wealth Inequality

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  • Charles I. Jones

Abstract

Since the early 2000s, research by Thomas Piketty, Emmanuel Saez, and their coauthors 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.

Suggested Citation

  • Charles I. Jones, 2015. "Pareto and Piketty: The Macroeconomics of Top Income and Wealth Inequality," Journal of Economic Perspectives, American Economic Association, vol. 29(1), pages 29-46, Winter.
  • Handle: RePEc:aea:jecper:v:29:y:2015:i:1:p:29-46
    Note: DOI: 10.1257/jep.29.1.29
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    More about this item

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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