Is an increasing capital share under capitalism inevitable?

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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.
Original languageEnglish
Pages (from-to)82-86
Number of pages5
JournalEuropean Journal of Political Economy
Volume38
DOIs
Publication statusPublished - 2015
Externally publishedYes

Keywords

  • capital
  • capitalism
  • distribution
  • income
  • income share

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