Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010 *

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ID: 295439
2014
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Abstract
Abstract How do aggregate wealth-to-income ratios evolve in the long run and why? We address this question using 1970–2010 national balance sheets recently compiled in the top eight developed economies. For the United States, United Kingdom, Germany, and France, we are able to extend our analysis as far back as 1700. We find in every country a gradual rise` of wealth-income ratios in recent decades, from about 200–300% in 1970 to 400–600% in 2010. In effect, today’s ratios appear to be returning to the high values observed in Europe in the eighteenth and nineteenth centuries (600–700%). This can be explained by a long-run asset price recovery (itself driven by changes in capital policies since the world wars) and by the slowdown of productivity and population growth, in line with the β=sg Harrod-Domar-Solow formula. That is, for a given net saving rate s = 10%, the long-run wealth-income ratio β is about 300% if g = 3% and 600% if g = 1.5%. Our results have implications for capital taxation and regulation and shed new light on the changing nature of wealth, the shape of the production function, and the rise of capital shares.
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openalex_W2273096424 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Thomas Piketty, Gabriel Zucman
Journal the quarterly journal of economics
Year 2014
DOI
10.1093/qje/qju018
URL
https://academic.oup.com/qje/article-pdf/129/3/1255/30630677/qju018.pdf
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