Against Piketty:
We study the effect of interest rates on wealth inequality. While lower rates decrease the growth rate of rentiers, they also increase the growth rate of entrepreneurs by making raising capital less expensive. To understand which effect dominates, we obtain a sufficient statistic for the effect of interest rates on the Pareto exponent of the wealth distribution: it depends on the shares and the rate of debt issuance over the life of the individuals located in the right tail of the wealth distribution. We estimate this statistic to be sufficient using new data on the trajectory of the greatest fortunes in the United States. Overall, we find that secular declines in interest rates (or more generally in required rates of return) can explain about 40% of the rise in Pareto inequality. ; that is, the extent to which the super rich have progressed relative to the rich.
It’s from a recent piece by Matthieu Gomez and Émilien Gouin-Bonenfant in Econometrica. Here is fewer secure copies. By Mr.
