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A Micro Perspective on r > g

Abstract : For which segments of the net wealth distribution are returns to wealth higher than growth rates of income? Although Piketty’s r > g is conceived as a tool to highlight distributional concerns, it does not account for covariation between real rates of return and position in the net wealth distribution. By exploiting large-scale administrative data on estimated gross and net personal wealth in Norway from 2010 to 2018, this paper establishes the first micro-level analysis of the difference between the real return on wealth and the real growth rate of total pre-tax income across the entire net wealth distribution. We show that, for the top half of the distribution, the aggregate R > G underestimates its micro counterpart r>g, whilst the opposite happens for the bottom half, indicating that the micro r > g qualifies as a more precise measure to thoroughly analyze the dynamics of wealth inequality. We show as well that around 44% of the variation in r > g when moving up from the bottom to the top decile of the net wealth distribution is associated with scale dependence, whilst the residual variation can be attributed to persistent heterogeneity.
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Preprints, Working Papers, ...
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https://halshs.archives-ouvertes.fr/halshs-03131196
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Submitted on : Thursday, February 4, 2021 - 10:48:55 AM
Last modification on : Tuesday, February 23, 2021 - 7:00:02 PM
Long-term archiving on: : Wednesday, May 5, 2021 - 6:20:45 PM

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Roberto Iacono, Elisa Palagi. A Micro Perspective on r > g. 2021. ⟨halshs-03131196⟩

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