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WEALTH INEQUALITY, OR r – g, IN THE ECONOMIC GROWTH MODEL

Published online by Cambridge University Press:  21 June 2017

Ryoji Hiraguchi
Ryoji Hiraguchi*
Affiliation:
Meiji University
*
Address correspondence to: Ryoji Hiraguchi, School of Political Science and Economics, Meiji University, 1-1, Kanda-surugadai, Chiyoda-ku, Tokyo, Japan; e-mail: [email protected].
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Abstract

I investigate a simple continuous-time overlapping generations model with a neoclassical production function. I demonstrate that the degree of wealth inequality is positively related to the difference between the real interest rate r and the growth rate of income g, and if g falls, the r – g gap widens and inequality worsens. I also argue that a wealth tax reduces the wealth inequality. All these results are consistent with the famous predictions advanced by Thomas Piketty in Capital in the Twenty-First Century (2014).

Keywords

Overlapping GenerationsInequalityWealth Tax
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 2 , March 2019 , pp. 479 - 488
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

This study is conducted as a part of the Project “Sustainable Growth and Macroeconomic Policy” undertaken at Research Institute of Economy, Trade and Industry (RIETI). I am grateful for helpful comments and suggestions by Hiroshi Yoshikawa, Takashi Unayama, Masayuki Keida, Koichi Ando, and Discussion Paper seminar participants at RIETI. I also thank three referees for their valuable comments.

References

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