Assessing Piketty's second law of capitalism

Jakob B. Madsen, Antonio Minniti, Francesco Venturini

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)

Abstract

This paper assesses Piketty's second fundamental law of capitalism to investigate patterns and determinants of wealth inequality over the last century and a half. We first discuss the foundations of this theory on the basis of the most popular growth models, and then perform a long-run regression analysis of wealth inequality using Piketty and Zucman's data and a new historical data set for the OECD countries covering the period since 1870 onwards. We find that the wealth-to-income ratio, β, is significantly related to the ratio between the saving rate, s, and the rate of income growth, g. The estimated coefficient for the s/g ratio ranges from 0.05 to 0.18, depending on the specification, while the theory predicts a unitary value. It is also shown that the wealth-to-income ratio responds to the variations in income growth much more than to variations in the saving rate.

Original languageEnglish
Pages (from-to)1-21
Number of pages21
JournalOxford Economic Papers
Volume70
Issue number1
DOIs
Publication statusPublished - 1 Jan 2018

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