The Triumph of the Rentier?

June 9, 2014

Taylor builds a model of growth and income distribution that shows Piketty's gloomy prediction of an ever greater share of income going to the rich to be far from inevitable.

Instead, the income distribution in the 21st century depends on sociopolitical outcomes, particularly government's role in stimulating economic activity and employment and setting taxes. Citing empirical studies of the upward evolution of the profit share over the past decades in the U.S., Taylor develops a demand-driven version of Luigi Pasinetti's 1962 model where the profit share is divided between wage-earners and rich capital owners (rentiers). Taylor shows that in the model the long-run rentier share in income depends on the saving bahaviors of rentiers and wage-earners, how much the profit share reacts to changes in economic activity, and taxes on rentier incomes. The model also shows that an inequitable long-run income distribution is accompanied by stagnation

Authors: Lance Taylor
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