Is Inequality Increasing in r – g ?
The Dynamics of Capital’s Income Share in the UK, 1210-2013

Abstract:

This paper provides the first very long term empirical examination of Piketty’s (2014) controversial hypothesis that inequality is increasing in r−g, (assets – real income). Using unique annual data on asset returns for a balanced portfolio and several other variables for the UK over the period 1210- 2013, the study examines whether the dynamics in capital’s income share, SW, are governed by (r − g). The analysis confirms that r and g are robust and significant determinants of factor shares and that they have been the major forces behind the large inequality waves over the past eight centuries.