Pareto and Piketty: The Macroeconomics of Top Income and Wealth Inequality

2015/02/01 by Charles I. Jones · 8 citations
Economics, Econometrics and Finance · #Economic theories and models #Economic Theory and Policy #Monetary Policy and Economic Impact

paper · doi:10.1257/jep.29.1.29

Abstract

Since the early 2000s, research by Thomas Piketty, Emmanuel Saez, and their coauthors has revolutionized our understanding of income and wealth inequality. In this paper, I highlight some of the key empirical facts from this research and comment on how they relate to macroeconomics and to economic theory more generally. One of the key links between data and theory is the Pareto distribution. The paper describes simple mechanisms that give rise to Pareto distributions for income and wealth and considers the economic forces that influence top inequality over time and across countries. For example, it is in this context that the role of the famous r – g expression is best understood.

Citations

• A Contribution to the Theory of Economic Growth
• Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010 *

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