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Explaining Income and Wealth Inequality over the Long Run: The Case of France

Author

Listed:
  • Stéphane Auray

    (CREST-ENSAI, Campus de Kerlann, Bruz)

  • Aurélien Eyquem

    (Univ Lyon, Université Lumière Lyon 2, GATE-LSE UMR 5824, F-69130 Ecully, France, and Institut Universitaire de France)

  • Bertrand Garbinti

    (CREST-ENSAE-Institut Polytechnique Paris, Palaiseau)

  • Jonathan Goupille-Lebret

    (Univ Lyon, CNRS, GATE-LSE UMR 5824, F-69130 Ecully, France, and ENS de Lyon)

Abstract

We build an original heterogeneous-agent model with three assets (deposits, housing and equity), labor-income risk, entrepreneurs, and a rich and realistic set of flat and progressive taxes and transfers. Using France as an illustration, the model fits the level and dynamics of wealth and income inequalities, the aggregate and distributional tax structure, the composition of wealth along the distribution as well as key macroeconomic aggregates over the 1984-2018 period. Rising markups account for the bulk of rising income inequality. Wealth inequality dynamics result mostly from changes in saving rate inequality but only in response to the exogenous changes in taxation and markups. Our results point to the critical importance of endogenous saving decisions in response to exogenous shocks as a key driver of wealth inequality.

Suggested Citation

  • Stéphane Auray & Aurélien Eyquem & Bertrand Garbinti & Jonathan Goupille-Lebret, 2022. "Explaining Income and Wealth Inequality over the Long Run: The Case of France," Working Papers 2210, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:2210
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    References listed on IDEAS

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    Cited by:

    1. Piketty, Thomas & Bozio, Antoine & Garbinti, Bertrand & Goupille-Lebret, Jonathan & Guillot, Malka, 2020. "Predistribution vs. Redistribution: Evidence from France and the U.S," CEPR Discussion Papers 15415, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Heterogeneous Agents; Taxes; Market Power; Income Inequality; Wealth Inequality;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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