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Rising wealth inequality: when r − g matters
[The rise and decline of general laws of capitalism]

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  • Hoang Khieu

Abstract

We investigate the effects of the gap between the rate of return on wealth and the growth rate, r − g, on wealth inequality using a model of inherited wealth and productivity inheritance featuring heterogeneity in labor income and in the death rate. The heterogeneity in the death rate implies different health types, which imply type dependence and scale dependence. Labor income heterogeneity implies a U-shaped effect of r − g on wealth inequality. Long-run wealth inequality increases in r − g if the distribution of the death rate features good-health types and if r − g is sufficiently larger than a positive threshold, which is increasing the dispersion of labor income. The share of good-health types and the r − g’s threshold in the Survey of Consumer Finances are 31.8% and 4.5%, respectively.

Suggested Citation

  • Hoang Khieu, 2022. "Rising wealth inequality: when r − g matters [The rise and decline of general laws of capitalism]," Oxford Economic Papers, Oxford University Press, vol. 74(2), pages 333-358.
    • Handle: RePEc:oup:oxecpp:v:74:y:2022:i:2:p:333-358.
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    File URL: http://hdl.handle.net/10.1093/oep/gpab023
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    Cited by:

    1. Khieu, Hoang & Wälde, Klaus, 2023. "Capital income risk and the dynamics of the wealth distribution," Economic Modelling, Elsevier, vol. 122(C).

    More about this item

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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