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Increasing capital income share and its effect on personal income inequality

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  • Milanovic, Branko

Abstract

Piketty's r>g implies an increase in capital-output ratio and in the share of capital income in net output. But it still does not guarantee the increase in personal income inequality. We derive the conditions for the "pass-through" from the rise in the share of capital income to greater personal income inequality. They have to do with the concentration of income from capital and its association with higher overall income. A key way to break the "pass-through" is to diversify ownership of capital ("people's capitalism").

Suggested Citation

  • Milanovic, Branko, 2015. "Increasing capital income share and its effect on personal income inequality," MPRA Paper 67661, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:67661
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    References listed on IDEAS

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    Cited by:

    1. Pawel Bukowski & Filip Novokmet, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," CEP Discussion Papers dp1628, Centre for Economic Performance, LSE.
    2. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," World Inequality Lab Working Papers hal-02876995, HAL.
    3. Yashin, Pete, 2020. "Финансиалиация Усиливает Неравенство И Заводит Экономику В Тупик [Financialization increases inequality and leads economy to a dead end]," MPRA Paper 101063, University Library of Munich, Germany.
    4. Yashin, Pete, 2020. "Law of conservation of real wealth and rising inequality," MPRA Paper 99308, University Library of Munich, Germany.
    5. Yashin, Pete, 2020. "Financialization increases inequality and leads economy to a dead end," MPRA Paper 101061, University Library of Munich, Germany.
    6. Bahmani-Oskooee, Mohsen & Hasanzade, Mehrnoosh & Bahmani, Sahar, 2022. "Stock returns and income inequality: Asymmetric evidence from state level data in the U.S," Global Finance Journal, Elsevier, vol. 52(C).
    7. Yashin, Pete, 2020. "Закон Сохранения Реального Богатства И Рост Неравенства [Law of conservation of real wealth and rising inequality]," MPRA Paper 99274, University Library of Munich, Germany.
    8. A. Tidu, 2023. "Dissecting inequality: conceptual problems, trends and drivers," Working Paper CRENoS 202313, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    9. Prashant Kumar Choudhary & Priyanka Saharia, 2023. "Global income inequality and measuring values with the world values survey," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(1), pages 103-122, June.
    10. Edmond Berisha & John Meszaros, 2020. "Long-Term Rates, Capital Shares, and Income Inequality," Open Economies Review, Springer, vol. 31(3), pages 619-635, July.
    11. David Strauss & Daniel Ventosa-Santaularia, 2023. "Does r-g cause wealth inequality? The case of the United States/¿La r-g causa la desigualdad de la riqueza? El caso de Estados Unidos," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 38(2), pages 183-224.
    12. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102814, London School of Economics and Political Science, LSE Library.
    13. Petrova, Bilyana & Ranaldi, Marco, 2021. "Determinants of Income Composition Inequality," SocArXiv vyrz7, Center for Open Science.
    14. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102834, London School of Economics and Political Science, LSE Library.
    15. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," Working Papers hal-02876995, HAL.

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    More about this item

    Keywords

    capital income; inequality; Piketty;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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