Pareto and Piketty: The macroeconomics of top income and wealth inequality

摘要

Since early 2000, Thomas Piketty et al. revolutionized the knowledge about income and wealth inequality through their pioneering work that puts forth the inequality r＞g to explain the process, many studies have been conducted in this area. The article highlights how this approach can be applied to macroeconomics and to economic theory in general terms. The basic function explaining wealth distribution is the Pareto distribution. This, along with other factors that influence wealth inequalities over time and across countries, is described. GDP can be split in to labor income and capital income. Within both these components inequalities exist and can be explained by various undercurrents. Piketty, like Marx, provokes one to think about the future possibilities. Until 1960, the growth rate of the bottom 99.9% was higher than the top 0.1%. Thereafter, the trend got reversed by recording considerable increase in their growth rate and the bottom group have recorded a reduction in their growth. This paper provides a deeper analysis of the growth rate of both these groups and its effects in the future economy. (38 refs.)