How do wealth-income ratios react to slowing growth in the long run? On Piketty's second fundamental law of capitalism

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Standard

How do wealth-income ratios react to slowing growth in the long run? On Piketty's second fundamental law of capitalism. / Karstoft, Jon Egeris; Whitta-Jacobsen, Hans Jørgen.

I: European Economic Review, Bind 156, 104471, 01.04.2023.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Karstoft, JE & Whitta-Jacobsen, HJ 2023, 'How do wealth-income ratios react to slowing growth in the long run? On Piketty's second fundamental law of capitalism', European Economic Review, bind 156, 104471. https://doi.org/10.1016/j.euroecorev.2023.104471

APA

Karstoft, J. E., & Whitta-Jacobsen, H. J. (2023). How do wealth-income ratios react to slowing growth in the long run? On Piketty's second fundamental law of capitalism. European Economic Review, 156, [104471]. https://doi.org/10.1016/j.euroecorev.2023.104471

Vancouver

Karstoft JE, Whitta-Jacobsen HJ. How do wealth-income ratios react to slowing growth in the long run? On Piketty's second fundamental law of capitalism. European Economic Review. 2023 apr. 1;156. 104471. https://doi.org/10.1016/j.euroecorev.2023.104471

Author

Karstoft, Jon Egeris ; Whitta-Jacobsen, Hans Jørgen. / How do wealth-income ratios react to slowing growth in the long run? On Piketty's second fundamental law of capitalism. I: European Economic Review. 2023 ; Bind 156.

Bibtex

@article{2fe2582af51c4b658d6692b0a9e39531,
title = "How do wealth-income ratios react to slowing growth in the long run?: On Piketty's second fundamental law of capitalism",
abstract = "Thomas Piketty and some of his coauthors have suggested an economic law named the Second Fundamental Law of Capitalism by Piketty, implying that a long-lasting and considerable growth slowdown will cause substantial increases in wealth–income ratios in the long run. Critics have pointed out that the reaction of wealth–income ratios depends on the reaction of saving/investment rates and, in particular, that sufficiently large decreases in these rates in response to a growth slowdown will revert the direction of Piketty{\textquoteright}s law. We conduct a theoretical investigation in a framework that endogenizes the reaction of saving rates in a standard way and find support for a version of Piketty{\textquoteright}s Second Law based on an exogenous gross saving rate, but not for Piketty{\textquoteright}s original version assuming an exogenous net saving rate. Consequently, the reaction of wealth–income ratios to a substantial growth slowdown will be smaller than suggested by Piketty{\textquoteright}s version of the law, but in the same direction and still substantial.",
author = "Karstoft, {Jon Egeris} and Whitta-Jacobsen, {Hans J{\o}rgen}",
year = "2023",
month = apr,
day = "1",
doi = "10.1016/j.euroecorev.2023.104471",
language = "English",
volume = "156",
journal = "European Economic Review",
issn = "0014-2921",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - How do wealth-income ratios react to slowing growth in the long run?

T2 - On Piketty's second fundamental law of capitalism

AU - Karstoft, Jon Egeris

AU - Whitta-Jacobsen, Hans Jørgen

PY - 2023/4/1

Y1 - 2023/4/1

N2 - Thomas Piketty and some of his coauthors have suggested an economic law named the Second Fundamental Law of Capitalism by Piketty, implying that a long-lasting and considerable growth slowdown will cause substantial increases in wealth–income ratios in the long run. Critics have pointed out that the reaction of wealth–income ratios depends on the reaction of saving/investment rates and, in particular, that sufficiently large decreases in these rates in response to a growth slowdown will revert the direction of Piketty’s law. We conduct a theoretical investigation in a framework that endogenizes the reaction of saving rates in a standard way and find support for a version of Piketty’s Second Law based on an exogenous gross saving rate, but not for Piketty’s original version assuming an exogenous net saving rate. Consequently, the reaction of wealth–income ratios to a substantial growth slowdown will be smaller than suggested by Piketty’s version of the law, but in the same direction and still substantial.

AB - Thomas Piketty and some of his coauthors have suggested an economic law named the Second Fundamental Law of Capitalism by Piketty, implying that a long-lasting and considerable growth slowdown will cause substantial increases in wealth–income ratios in the long run. Critics have pointed out that the reaction of wealth–income ratios depends on the reaction of saving/investment rates and, in particular, that sufficiently large decreases in these rates in response to a growth slowdown will revert the direction of Piketty’s law. We conduct a theoretical investigation in a framework that endogenizes the reaction of saving rates in a standard way and find support for a version of Piketty’s Second Law based on an exogenous gross saving rate, but not for Piketty’s original version assuming an exogenous net saving rate. Consequently, the reaction of wealth–income ratios to a substantial growth slowdown will be smaller than suggested by Piketty’s version of the law, but in the same direction and still substantial.

U2 - 10.1016/j.euroecorev.2023.104471

DO - 10.1016/j.euroecorev.2023.104471

M3 - Journal article

VL - 156

JO - European Economic Review

JF - European Economic Review

SN - 0014-2921

M1 - 104471

ER -

ID: 370584080