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Increasing capital income share and its effect on personal income inequality

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  • Milanovic, Branko

Abstract

Piketty's r>g implies an increase in capital-output ratio and in the share of capital income in net output. But it still does not guarantee the increase in personal income inequality. We derive the conditions for the "pass-through" from the rise in the share of capital income to greater personal income inequality. They have to do with the concentration of income from capital and its association with higher overall income. A key way to break the "pass-through" is to diversify ownership of capital ("people's capitalism").

Suggested Citation

  • Milanovic, Branko, 2015. "Increasing capital income share and its effect on personal income inequality," MPRA Paper 67661, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:67661
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    References listed on IDEAS

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    1. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 61-103.
    2. Atkinson,Anthony B. & Lakner,Christoph & Atkinson,Anthony B. & Lakner,Christoph, 2017. "Capital and labor : the factor income composition of top incomes in the United States, 1962-2006," Policy Research Working Paper Series 8268, The World Bank.
    3. A. B. Atkinson, 2009. "Factor shares: the principal problem of political economy?," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 3-16, Spring.
    4. Ng, Yew-Kwang, 2015. "Is an increasing capital share under capitalism inevitable?," European Journal of Political Economy, Elsevier, vol. 38(C), pages 82-86.
    5. Bengtsson, Erik & Waldenström, Daniel, 2018. "Capital Shares and Income Inequality: Evidence from the Long Run," The Journal of Economic History, Cambridge University Press, vol. 78(3), pages 712-743, September.
    6. repec:oup:qjecon:v:129:y:2013:i:1:p:61-103 is not listed on IDEAS
    7. Margaret M. Jacobson & Filippo Occhino, 2012. "Labor's declining share of income and rising inequality," Economic Commentary, Federal Reserve Bank of Cleveland, issue Sept.
    8. Atkinson, Anthony B., 2015. "Inequality: what can be done?," LSE Research Online Documents on Economics 101810, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Pawel Bukowski & Filip Novokmet, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," CEP Discussion Papers dp1628, Centre for Economic Performance, LSE.
    2. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," World Inequality Lab Working Papers hal-02876995, HAL.
    3. Yashin, Pete, 2020. "Финансиалиация Усиливает Неравенство И Заводит Экономику В Тупик [Financialization increases inequality and leads economy to a dead end]," MPRA Paper 101063, University Library of Munich, Germany.
    4. Yashin, Pete, 2020. "Law of conservation of real wealth and rising inequality," MPRA Paper 99308, University Library of Munich, Germany.
    5. Yashin, Pete, 2020. "Financialization increases inequality and leads economy to a dead end," MPRA Paper 101061, University Library of Munich, Germany.
    6. Yashin, Pete, 2020. "Закон Сохранения Реального Богатства И Рост Неравенства [Law of conservation of real wealth and rising inequality]," MPRA Paper 99274, University Library of Munich, Germany.
    7. Edmond Berisha & John Meszaros, 2020. "Long-Term Rates, Capital Shares, and Income Inequality," Open Economies Review, Springer, vol. 31(3), pages 619-635, July.
    8. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102814, London School of Economics and Political Science, LSE Library.
    9. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102834, London School of Economics and Political Science, LSE Library.
    10. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," Working Papers hal-02876995, HAL.

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    More about this item

    Keywords

    capital income; inequality; Piketty;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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