Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333888 
Year of Publication: 
2025
Series/Report no.: 
Kiel Working Paper No. 2308
Publisher: 
Kiel Institute for the World Economy, Kiel
Abstract: 
Using historical income and wealth data, we show that war reduces inequality: the top-1% income share falls by 20% and the top-1% wealth share by 10%. We measure three key drivers of inequality - capital destruction, taxation, and inflation - in the data and quantify their role with a Heterogeneous Agent New Keynesian (HANK) model. Destruction depresses profits and thus top incomes. Taxation primarily influences wealth dynamics, while inflation has little effect on top shares, but reduces indebtedness among poorer households. We validate our findings using new data on inequality across German towns in World War 2 and cross-country data on profits.
Subjects: 
Interstate Wars
Inequality
Income share
Wealth share
Distribution
Capital destruction
Inflation
Taxes
HANK
JEL: 
F40
F50
E50
Document Type: 
Working Paper

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