The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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.