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Is an Increasing Capital Share under Capitalism Inevitable?

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  • Yew-Kwang NG

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological Univer- sity. Address: 14 Nanyang Drive, Singapore, 637332.)

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

  • Yew-Kwang NG, 2014. "Is an Increasing Capital Share under Capitalism Inevitable?," Economic Growth Centre Working Paper Series 1410, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    • Handle: RePEc:nan:wpaper:1410
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    References listed on IDEAS

    as
    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. Milanovic, Branko, 2015. "Increasing capital income share and its effect on personal income inequality," MPRA Paper 67661, University Library of Munich, Germany.
    2. Yonatan Berman & Yoash Shapira & Eshel Ben-Jacob, 2015. "Modeling the Origin and Possible Control of the Wealth Inequality Surge," PLOS ONE, Public Library of Science, vol. 10(6), pages 1-21, June.
    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.
    4. Nabamita Dutta & Lisa Giddings & Sanjukta Roy, 2019. "Can Greater Attention To Women'S Rights Help Address Income Inequality?," Contemporary Economic Policy, Western Economic Association International, vol. 37(3), pages 545-559, July.
    5. A. Tidu, 2023. "Dissecting inequality: conceptual problems, trends and drivers," Working Paper CRENoS 202313, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    6. Alexandre, Fernando & Bação, Pedro & Veiga, Francisco José, 2022. "The political economy of productivity growth," European Journal of Political Economy, Elsevier, vol. 75(C).
    7. G. C. Harcourt, 2014. "Comment: Lance Taylor on Thomas Piketty’s World as Seen Through the Eyes of Maynard Keynes and Luigi Pasinetti," International Journal of Political Economy, Taylor & Francis Journals, vol. 43(3), pages 18-25, July.

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    More about this item

    Keywords

    capital; capitalism; distribution; income; wealth;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies

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