Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/213392
Authors: 
Ederer, Stefan
Rehm, Miriam
Year of Publication: 
2018
Series/Report no.: 
FMM Working Paper No. 35
Abstract: 
If Piketty's main theoretical prediction (r>g leads to rising wealth inequality) is taken to its radical conclusion, then a small elite will own all wealth if capitalism is left to its own devices. We formulate and calibrate a Post-Keynesian model with an endogenous distribution of wealth between workers and capitalists which permits such a corner solution of all wealth held by capitalists. However, it also shows interior solutions with a stable, non-zero wealth share of workers, a stable wealth-to-income ratio, and a stable and positive gap between the profit and the growth rate determined by the Cambridge equation. More importantly, simulations show that the model conforms to Piketty's empirical findings during a transitional phase of increasing wealth inequality, which characterizes the current state of high-income countries: The wealth share of capitalists rises to over 60%, the wealth-to-income ratio increases, and income inequality rises. Finally, we show that the introduction of a wealth tax as suggested by Piketty could neutralize this rise in wealth concentration predicted by our model.
Subjects: 
Post-Keynesian
model
wealth
saving
inequality
Piketty
simulation
JEL: 
C63
D31
E12
E21
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.