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A Gordon growth formula for wealth-income ratios and its implications on cross-country differences

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  • Kim, Daehwan
  • Nilsen, Jeffrey

Abstract

We present a Gordon-growth-model-based formula for wealth-income ratios and empirically examine its implications on long-run cross-country differences in wealth-income ratios. Firstly, we find that wealth-income ratios have a negative cross-country correlation with saving rates, contrary to the conventional understanding of the relationship as posited by Piketty and Zucman (2014). Secondly, we find that the labor share of income contributes significantly to cross-country variation in wealth-income ratios.

Suggested Citation

  • Kim, Daehwan & Nilsen, Jeffrey, 2023. "A Gordon growth formula for wealth-income ratios and its implications on cross-country differences," Finance Research Letters, Elsevier, vol. 58(PD).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009819
    DOI: 10.1016/j.frl.2023.104609
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    More about this item

    Keywords

    Wealth-income ratios; Gordon growth model; Cross-country differences; Correlation between wealth-income ratios and saving rates; Labor share;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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