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Making sense of Piketty's "fundamental laws" in a Post-Keynesian framework

Ederer, Stefan and Rehm, Miriam (2018) Making sense of Piketty's "fundamental laws" in a Post-Keynesian framework. INEQ Working Paper Series, 10. WU Vienna University of Economics and Business, Vienna.

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Abstract

Piketty's main theoretical prediction is that a small elite will own all wealth if capitalism is left to its own devices. We formulate and calibrate a Post-Keynesian model with an endogenous distribution of wealth between workers and capitalists. The model permits Piketty's Corner solution of all wealth held by capitalists; however, it also shows that interior solutions with a stable, non-zero wealth share of workers, a stable wealth-to-income ratio, and a stable and positive gap between the profit and the growth rate determined by the Cambridge equation. Furthermore, simulations show that the model confirms to Piketty's empirical findings in a transitional phase, in which the wealth share of capitalists rises to over 60%, the wealth-toincome ratio increases, and income inequality rises. Finally, we show that the introduction of a wealth tax as suggested by Piketty could neutralize the rise in wealth concentration.

Item Type: Paper
Keywords: Post-Keynesian, model, wealth, saving, inequality, Piketty, simulation
Classification Codes: JEL C63, D31, E12, E21
Divisions: Forschungsinstitute > Verteilungsfragen
Depositing User: Judith Derndorfer
Date Deposited: 12 Sep 2018 15:24
Last Modified: 12 Sep 2018 17:05
URI: http://epub.wu.ac.at/id/eprint/6502

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