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Pareto and Piketty: The Macroeconomics of Top Income and Wealth Inequality

Listed author(s):
  • Charles I. Jones

Since the early 2000s, research by Thomas Piketty, Emmanuel Saez, and their coathors has revolutionized our understanding of income and wealth inequality. In this paper, I highlight some of the key empirical facts from this research and comment on how they relate to macroeconomics and to economic theory more generally. One of the key links between data and theory is the Pareto distribution. The paper describes simple mechanisms that give rise to Pareto distributions for income and wealth and considers the economic forces that influence top inequality over time and across countries. For example, it is in this context that the role of the famous r-g expression is best understood.

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File URL: http://www.nber.org/papers/w20742.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20742.

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Date of creation: Dec 2014
Publication status: published as Charles I. Jones, 2015. "Pareto and Piketty: The Macroeconomics of Top Income and Wealth Inequality," Journal of Economic Perspectives, vol 29(1), pages 29-46.
Handle: RePEc:nbr:nberwo:20742
Note: EFG LS PE
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  1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
  2. Jess Benhabib & Alberto Bisin & Shenghao Zhu, 2011. "The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents," Econometrica, Econometric Society, vol. 79(1), pages 123-157, January.
  3. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 61-103.
  4. Ezra Oberfield & Devesh Raval, 2012. "Micro data and macro technology," Working Paper Series WP-2012-11, Federal Reserve Bank of Chicago.
  5. Benjamin Bridgman, 2014. "Is Labor's Loss Capital's Gain? Gross versus Net Labor Shares," BEA Working Papers 0114, Bureau of Economic Analysis.
  6. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, May.
  7. Xavier Gabaix, 1999. "Zipf's Law for Cities: An Explanation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 739-767.
  8. Nirei, Makoto, 2009. "Pareto Distributions in Economic Growth Models," IIR Working Paper 09-05, Institute of Innovation Research, Hitotsubashi University.
  9. Aoki, Shuhei & Nirei, Makoto, 2013. "Pareto Distributions and the Evolution of Top Incomes in the U.S," MPRA Paper 47967, University Library of Munich, Germany.
  10. Odran Bonnet & Pierre-Henri Bono & Guillaume Chapelle & Etienne Wasmer, 2014. "Does housing capital contribute to inequality? A comment on Thomas Piketty’s Capital in the 21st Century," Sciences Po Economics Discussion Papers 2014-07, Sciences Po Departement of Economics.
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