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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

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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. Milanovic, Branko, 2015. "Increasing capital income share and its effect on personal income inequality," MPRA Paper 67661, University Library of Munich, Germany.
    2. 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.
    3. 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.
    4. 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.

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    More about this item

    Keywords

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

    JEL classification:

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

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