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Is an increasing capital share under capitalism inevitable?

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  • Ng, Yew-Kwang

Abstract

Piketty's influential book Capital in the Twenty-First Century and its prominent review by Milanovic in the Journal of Economic Literature both assert the inevitability of an increasing share of capital in total income, given a higher rate of return to capital than the rate of growth in income. This paper shows by a specific example, a logical argument and its intuition that the alleged inevitability is not valid. Even just for capital to grow faster than income, we need an additional requirement that saving of non-capital income is larger than consumption of capital income. Even if this is satisfied, the capital share may not increase as the rate of return may fall and non-capital incomes may increase with capital accumulation.

Suggested Citation

  • Ng, Yew-Kwang, 2015. "Is an increasing capital share under capitalism inevitable?," European Journal of Political Economy, Elsevier, vol. 38(C), pages 82-86.
  • Handle: RePEc:eee:poleco:v:38:y:2015:i:c:p:82-86
    DOI: 10.1016/j.ejpoleco.2015.02.001
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    References listed on IDEAS

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    1. Branko Milanovic, 2014. "The Return of "Patrimonial Capitalism": A Review of Thomas Piketty's Capital in the Twenty-First Century," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 519-534, June.
    2. Young, Andrew T. & Lawson, Robert A., 2014. "Capitalism and labor shares: A cross-country panel study," European Journal of Political Economy, Elsevier, vol. 33(C), pages 20-36.
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    Cited by:

    1. Branko Milanovic, 2016. "Increasing Capital Income Share and its Effect on Personal Income Inequality," LIS Working papers 663, LIS Cross-National Data Center in Luxembourg.
    2. repec:mes:ijpoec:v:43:y:2014:i:3:p:18-25 is not listed on IDEAS
    3. Yew-Kwang NG, 2016. "Extending Economic Analysis to Analyze Policy Issues More Broadly," Economic Growth Centre Working Paper Series 1609, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.

    More about this item

    Keywords

    Capital; Capitalism; Distribution; Income; Income share;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • P1 - Economic Systems - - Capitalist Systems

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