Article (Scientific journals)
Endogenous Factor Income Distribution: Piketty meets Romer
Irmen, Andreas; Tabakovic, Amer
2020In Economic Inquiry, 58, p. 1342-1361
Peer reviewed
 

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Keywords :
Endogenous Technological Change; Capital Accumulation; Aggregate Factor Income Distribution
Abstract :
[en] What is the relationship between the economy’s long-run growth rate, its capital-income ratio, and its factor income distribution? We argue that a satisfactory answer must be derived in an analytical framework that treats the growth and the savings rate as endogenous. From this perspective we scrutinize Piketty’s (2014) theory put forth in his book Capital in the Twenty-First Century in a richly parameterized variant of Romer’s (1990) seminal model with and without population growth. The economy’s growth and its savings rate are exogenous in Piketty’s theory and endogenous in Romer’s. We find that a smaller long-run growth rate may be associated with a smaller capital-income ratio. Hence, the key implication of Piketty’s Second Fundamental Law of Capitalism does not hold. Moreover, in contrast to Piketty’s theory, a smaller long-run growth rate may go together with a greater or a smaller capital share.
Research center :
CREA
Disciplines :
Macroeconomics & monetary economics
Author, co-author :
Irmen, Andreas  ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Tabakovic, Amer ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
External co-authors :
yes
Language :
English
Title :
Endogenous Factor Income Distribution: Piketty meets Romer
Publication date :
2020
Journal title :
Economic Inquiry
Volume :
58
Pages :
1342-1361
Peer reviewed :
Peer reviewed
Focus Area :
Sustainable Development
Available on ORBilu :
since 24 February 2020

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