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The Dynamics of Capital Accumulation in the US: Simulations after Piketty

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Abstract

We calibrate a sequence of four nested models to study the dynamics of wealth accumulation. Individuals maximize a utility function whose arguments are consumption and investment. They desire to accumulate wealth for its own sake — this is not a life-cycle model. A competitive firm produces a single good from labor and capital; the rate of return to capital and the wage rate are market-clearing. The second model introduces political lobbying by the wealthy, whose purpose is to reduce the tax rate on capital income. The third model introduces differential rates of return to capitals of different sizes. The fourth model introduces inheritance and intergenerational mobility.

Suggested Citation

  • Philippe De Donder & John E. Roemer, 2015. "The Dynamics of Capital Accumulation in the US: Simulations after Piketty," Cowles Foundation Discussion Papers 1998, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:1998
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    1. De Donder Philippe & Roemer John E., 2016. "An allegory of the political influence of the top 1%," Business and Politics, De Gruyter, vol. 18(1), pages 85-96, April.

    More about this item

    Keywords

    Piketty; Dynamics of wealth accumulation; Intergenerational mobility; Kantian equilibrium;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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