Contra Piketty:
We study the impact of interest rates on wealth inequality. Although low rates reduce the rate of growth of employers, they also increase the rate of growth of entrepreneurs by making it cheaper to raise capital. To understand which effect dominates, we find sufficient statistics of the effect of interest rates on the Pareto exponent of the wealth distribution: it depends on the lifetime income and the level of debt issuance of people in the right tail of the wealth distribution. We estimate this sufficient number using new data on the trend of high wealth in the US Overall, we find that the country’s decline in interest rates (or generally above the required rates of return) can account for about 40% of the increase in Pareto inequality. ; that is, the rate at which the super-rich passed away compared to the rich.
That comes from a recent piece by Matthieu Gomez and Émilien Gouin-Bonenfant in Econometrica. Here are the copies with small gates. With M.
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