Pareto and Piketty: The Macroeconomics of Top Income and Wealth Inequality
Since the early 2000s, research by Thomas Piketty, Emmanuel Saez, and their coathors has revolutionized our understanding of income and wealth inequality. In this paper, I highlight some of the key empirical facts from this research and comment on how they relate to macroeconomics and to economic theory more generally. One of the key links between data and theory is the Pareto distribution. The paper describes simple mechanisms that give rise to Pareto distributions for income and wealth and considers the economic forces that influence top inequality over time and across countries. For example, it is in this context that the role of the famous r-g expression is best understood.
Prepared for a symposium in the Journal of Economic Perspectives. I am grateful to the editors, Jess Benhabib, Xavier Gabaix, Jihee Kim, Pete Klenow, Ben Moll, and Chris Tonetti for helpful conversations and comments. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Charles I. Jones, 2015. "Pareto and Piketty: The Macroeconomics of Top Income and Wealth Inequality," Journal of Economic Perspectives, vol 29(1), pages 29-46. citation courtesy of