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The Fundamental Contradiction Of Capitalism Revisited

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  • Marcos Gómez
  • Francisco Parro

Abstract

We build an overlapping generations model to analyse the evolution of inequality as an economy develops. Our model economy resembles a ‘very capitalist society’. Initially, wealth is exclusively concentrated in a rich dynasty. We ask whether or not this type of capitalist economy contains a fundamental contradiction, as claimed by Piketty in his recent book. We derive a condition under which the economy is driven to a state of perpetual inequality. However, we also show that an economy where capital deepening triggers the development process is very unlikely to be absorbed in that state.

Suggested Citation

  • Marcos Gómez & Francisco Parro, 2018. "The Fundamental Contradiction Of Capitalism Revisited," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 381-399, October.
    • Handle: RePEc:bla:buecrs:v:70:y:2018:i:4:p:381-399
    DOI: 10.1111/boer.12147
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