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Testing Piketty’s Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics
Author:
Carlos Góes
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Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 160
Language:
English
Publication Date:
03 Aug 2016
DOI:
https://doi.org/10.5089/9781475523249.001
ISBN:
9781475523249
ISSN:
1018-5941
Pages:
27
Keywords:
WP; capital share; Income Inequality; Panel VAR; Factor Income Distribution; share response; share shock; inequality pattern; share of capital; narrative center; National income; Capital income; Personal income; Income distribution; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund