Jakob Madsen

General seminars
amse seminar

Jakob Madsen

Monash University
Is r > g? Piketty’s third law of capitalist economics and the dynamics of inequality in Britain, 1210-2013

VC Cinéma le Miroir

Centre de la Vieille-Charité - Cinéma le Miroir

Centre de la Vieille Charité
2 rue de la Charité
13002 Marseille

Monday, September 19 2016| 2:30pm to 4:00pm

Timothée Demont: timothee.demont[at]univ-amu.fr
Roberta Ziparo: rziparo[at]gmail.com


Piketty suggests that the relationship r > g, often referred to as Piketty’s Third Law, is one of the most powerful models to analyze structural changes in wealth inequality and Piketty refers to r > g as ‘the central contradiction of capitalist economics’. This paper constructs annual data for Britain on asset returns over the period 1210-2013 and examines whether the dynamics in the wealth-income ratio, W-Y, as a proxy for inequality, is governed by (r–g). It is shown that Piketty’s Third Law needs to be extended to r+sW > g+X  before the W-Y ratio starts increasing, where X is a positive constant and sW is the propensity to save out of wealth. Estimates give strong support for the extended model.

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