Arbeitspapier
Making sense of Piketty's "fundamental laws" in a Post-Keynesian framework: The transitional dynamics of wealth inequality
If Piketty's main theoretical prediction (r>g leads to rising wealth inequality) is taken to its radical conclusion, then a small elite will own all wealth if capitalism is left to its own devices. We formulate and calibrate a Post-Keynesian model with an endogenous distribution of wealth between workers and capitalists which permits such a corner solution of all wealth held by capitalists. However, it also shows interior solutions with a stable, non-zero wealth share of workers, a stable wealth-to-income ratio, and a stable and positive gap between the profit and the growth rate determined by the Cambridge equation. More importantly, simulations show that the model conforms to Piketty's empirical findings during a transitional phase of increasing wealth inequality, which characterizes the current state of high-income countries: The wealth share of capitalists rises to over 60%, the wealth-to-income ratio increases, and income inequality rises. Finally, we show that the introduction of a wealth tax as suggested by Piketty could neutralize this rise in wealth concentration predicted by our model.
- Language
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Englisch
- Bibliographic citation
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Series: FMM Working Paper ; No. 35
- Classification
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Wirtschaft
Computational Techniques; Simulation Modeling
Personal Income, Wealth, and Their Distributions
General Aggregative Models: Keynes; Keynesian; Post-Keynesian
Macroeconomics: Consumption; Saving; Wealth
- Subject
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Post-Keynesian
model
wealth
saving
inequality
Piketty
simulation
- Event
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Geistige Schöpfung
- (who)
-
Ederer, Stefan
Rehm, Miriam
- Event
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Veröffentlichung
- (who)
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Hans-Böckler-Stiftung, Macroeconomic Policy Institute (IMK), Forum for Macroeconomics and Macroeconomic Policies (FMM)
- (where)
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Düsseldorf
- (when)
-
2018
- Handle
- Last update
- 10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ederer, Stefan
- Rehm, Miriam
- Hans-Böckler-Stiftung, Macroeconomic Policy Institute (IMK), Forum for Macroeconomics and Macroeconomic Policies (FMM)
Time of origin
- 2018
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A (post-)Keynesian perspective on "financialisation"
Post-Keynesian institutionalism after the great recession
Post-Keynesian macrodynamics and path-dependent growth
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Post-Keynesian dynamic stochastic general equilibrium theory
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Uncertainty, bounded rationality and post-Keynesian Macroeconomics
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