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Inherited vs Self-Made Wealth: Theory and Evidence from a Rentier Society (Paris 1872-1937)

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  • Thomas Piketty

    (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - ENS Paris - École normale supérieure - Paris, PSE - Paris School of Economics)

  • Gilles Postel-Vinay

    (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - ENS Paris - École normale supérieure - Paris, PSE - Paris School of Economics)

  • Jean-Laurent Rosenthal

    (CS CALTECH - Computer Science Department - CALTECH - California Institute of Technology)

Abstract

This paper divides the population into two groups: the "inheritors" or "rentiers" (whose wealth is smaller than the capitalized value of their inherited wealth, i.e. who consumed more than their labor income during their lifetime); and the "savers" or "self-made men" (whose wealth is larger than the capitalized value of their inherited wealth, i.e. who consumed less than their labor income). Applying this simple theoretical model to a unique micro data set on inheritance and matrimonial property regimes, we find that Paris in 1872-1937 looks like a prototype "rentier society". Rentiers made about 10% of the population of Parisians but owned 70% of aggregate wealth. Rentier societies thrive when the rate of return on private wealth ris permanently and substantially larger than the growth rate g (say, r=4%-5% vs g=1%-2%). This was the case in the 19th century and early 20th century and is likely to happen again in the 21st century. In such cases top successors, by consuming part of the return to their inherited wealth, can sustain living standards far beyond what labor income alone would permit.

Suggested Citation

  • Thomas Piketty & Gilles Postel-Vinay & Jean-Laurent Rosenthal, 2011. "Inherited vs Self-Made Wealth: Theory and Evidence from a Rentier Society (Paris 1872-1937)," PSE Working Papers halshs-00601075, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00601075
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00601075
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. We are turning into a rentier society again
      by Economic Logician in Economic Logic on 2011-07-22 19:29:00

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    Cited by:

    1. Christoph Schinke, 2012. "Inheritance in Germany 1911 to 2009: A Mortality Multiplier Approach," SOEPpapers on Multidisciplinary Panel Data Research 462, DIW Berlin, The German Socio-Economic Panel (SOEP).

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    Keywords

    rentier society;

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