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Testing Piketty’s Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics

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  • Carlos Góes

Abstract

Thomas Piketty's Capital in the Twenty-First Century puts forth a logically consistent explanation for changes in income and wealth inequality patterns. However, while rich in data, the book provides no formal empirical testing for its theoretical causal chain. In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.

Suggested Citation

  • Carlos Góes, 2016. "Testing Piketty’s Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics," IMF Working Papers 2016/160, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/160
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    7. Corak, Miles, 2016. "Inequality from Generation to Generation: The United States in Comparison," IZA Discussion Papers 9929, Institute of Labor Economics (IZA).
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    Cited by:

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    3. Jurgen Spaanderman, 2018. "An urgent call to get better prepared for unexpected events," DNB Occasional Studies 1602, Netherlands Central Bank, Research Department.
    4. Konstantin A. Kholodilin & Sebastian Kohl, 2021. "Rent Price Control – Yet Another Great Equalizer of Economic Inequalities?: Evidence from a Century of Historical Data," Discussion Papers of DIW Berlin 1927, DIW Berlin, German Institute for Economic Research.
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    6. Aramish Altaf Alvi & Abid Raza Khan & Tariq Hussain, 2024. "Can Piketty’s Interest Rate – Growth Rate Framework Explain Increasing Income Inequality in Pakistan?," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 821-829.
    7. Nauro F. Campos & Corrado Macchiarelli & Fotios Mitropoulos, 2024. "Okun in the Euro: New Evidence from Structural Okun Law’s Estimates for the Euro Area, 1979-2019," CESifo Working Paper Series 11314, CESifo.
    8. Zakaria Chtouki, 2020. "Income inequities: Diagnosis and theoretical challenges," Post-Print hal-03198224, HAL.
    9. Xuecheng Fan & Zeshui Xu & Marinko Skare & Xinxin Wang, 2025. "The impact of COVID-19 on unemployment dynamics: a panel analysis of youth and gender-specific unemployment in European countries," International Entrepreneurship and Management Journal, Springer, vol. 21(1), pages 1-24, December.

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