Confronting Piketty:
A Better Model of Wealth Inequality
DOI:
https://doi.org/10.25071/1874-6322.40634Keywords:
Household wealth, Inequality, Portfolio compositionAbstract
This paper looks at trends in household wealth from 1983 to 2019. Asset prices plunged between 2007 and 2010 but then rebounded from 2010 to 2019. The most telling finding is that median wealth plummeted by 43.9 per cent over years 2007 to 2010, almost double the drop in housing prices. From 2010 to 2016 median wealth rebounded by 17.1 per cent and then by another 21.2 per cent from 2016 to 2019. However, median wealth in 2019 was still down 20.4 per cent from its peak in 2007. The inequality of net worth, as measured by the Gini coefficient, after almost two decades of little movement, was up sharply from 2007 to 2010. It then increased moderately from 2010 to 2016, while the wealth share of the top one per cent shot up by 4.5 percentage points. There was a remission of inequality between 2016 and 2019, with the Gini coefficient and the top percentile share both falling. The paper then “confronts” Piketty’s (2014) now famous “law” that wealth inequality rises if r>g namely, if the rate of return on capital, r , is greater than the rate of real output growth, g - and conversely. In fact, I show that the Piketty condition is not generally met, at least in the case of the U.S. over years 1983 to 2019.
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