Testing Piketty’s Hypothesis on the Drivers of Income Inequality : Evidence from Panel VARs with Heterogeneous Dynamics

Author/Editor:

Carlos Góes

Publication Date:

August 3, 2016

Electronic Access:

Free Full text (PDF file size is 1083 KB).Use the free Adobe Acrobat Reader to view this PDF file

Link to data for this title(ZIP file size is 127 KB).

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Thomas Piketty's Capital in the Twenty-First Century puts forth a logically consistent explanation for changes in income and wealth inequality patterns. However, while rich in data, the book provides no formal empirical testing for its theoretical causal chain. In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.

Series:

Working Paper No. 16/160

Subject:

English

Publication Date:

August 3, 2016

ISBN/ISSN:

9781475523249/1018-5941

Stock No:

WPIEA2016160

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

27

Please address any questions about this title to publications@imf.org