Hitotsubashi Institute for Advanced Study


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


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.

Report No.: HIAS-E-70
Author(s): Jakob B. Madsen(a)
Affiliation: (a) Department of Economics, Monash University
Issued Date: June 2018
Keywords: Inequality and the (r − g)-gap, dynamics of inequality, inequality in the UK, 1210-2013
JEL: E1, E2, O4, N1, N30, P1