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The Distribution of Wealth and Real Growth in Italy: A Post-Keynesian Perspective

Published in Economics (Volume 7, Issue 2)
Received: 29 August 2018     Accepted: 20 September 2018     Published: 13 October 2018
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Abstract

This paper considers the problem of the determinants of income distribution in the light of the recent hypotheses advanced by Piketty on the evolution of the capitalistic system. It first reinterprets Piketty’s analysis in the context of a modified Cambridge model, where functional income distribution can adjust to ensure equality between a warranted rate and a natural rate of growth. The paper shows that this model yields some of the effects depicted by Piketty’s analysis through the rate of return to capital and the exogenous growth rate, if not only the functional, but also the personal distribution of income reacts to equilibrate the economy in response to divergent growth in the goods and labor markets. These results imply that the capital share of income and the share of the richer part of the population tend to move in the opposite direction in response to growth, so that, especially under declining growth, the fiscal treatment of capital and wealth should be different, with lower taxation for productive capital and increasing progressivity for income taxes. The main results of theoretical analysis are tested on data for the last 40 years of performance of the Italian economy, finding some significant consistency between the hypotheses formulated on the basis of the theoretical considerations above and the empirical evidence.

Published in Economics (Volume 7, Issue 2)
DOI 10.11648/j.eco.20180702.12
Page(s) 34-46
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2018. Published by Science Publishing Group

Keywords

Post-Keynesian, Functional, Personal, Income Distribution, Growth

References
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[2] Piketty, T., Saez E., and Zucman, G. (2016). Distributional National Accounts: Methods and Estimates for the United States. National Bureau of Economic Research Working Paper, No 22945.
[3] Facundo, A., Chancel, L., Piketty, T., Saez, E. and Zucman, G. (2017). Global Inequality Dynamics: New Findings from WID.world. American Economic Review, Vol. 107, No 5, pp 404-409.
[4] Piketty, T. (2014a). Capital in the Twenty-First Century, Cambridge MA: Belknap Press.
[5] Targetti Lenti, R. (2015). Is Piketty’s approach right? Which consequences for the Inequality Growth nexus?. Second Conference of SITES/IDEAS, Florence, 23 September 2015.
[6] Piketty, T. (2015). About Capital in the Twenty-First Century. American Economic Review, Vol. 105, No 5, pp 48-53. DOI: 10.1257/aer.p20151060.
[7] Zucman, G. (2014). Taxing Across Borders: Tracking Personal Wealth and Corporate Profits. Journal of Economic Perspectives, Vol. 28, No 4, pp 121–148.
[8] Taylor, L. (2014). The Triumph of the Rentier? Thomas Piketty vs. Luigi Pasinetti and John Maynard Keynes. Institute for New Economic Thinking, 1-19.
[9] Harrod, R.F. (1939). An Essay in Dynamic Theory, Economic Journal. Vol. 49, pp 14-33.
[10] Domar, E. (1946). Capital Expansion, Rate of Growth, and Employment, Econometrica. Vol. 14, pp. 137-250.
[11] Kalecki, M. (1943). Political Aspects of Full Employment. Political Quarterly. Vol. 14, pp 201-223.
[12] Pasinetti, L.L. (1962). Income Distribution and rate of Profit in Relation to the Rate of Economic Growth. Reviews of Economic Studies. Vol. 29, pp 267-279.
[13] Guiso, L., Jappelli T. and Terlizzese D. (1996). Income Risk, Borrowing Constraints, and Portfolio Choice. American Economic Review, American Economic Association. Vol. 86, No. 1, pp 158-72.
[14] Kessler D., Wolff E.N. (1991). A Comparative Analysis of Household Wealth Patterns in France and the United States. Review of Income and Wealth, 37, 3: 249-66, September.
[15] Harrod, R. F. (1973). Economic Dynamics. London: MacMillan.
[16] Piketty, T., Saez, E. and Stantcheva, S. (2014b). Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities. American Economic Journal: Economic Policy. Vol. 6, No. 1, pp. 230–71.
[17] Koenker, R. and Bassett G., (1978). Regression Quantiles. Econometrica. Vol. 46, pp 33-50.
[18] Chamberlain, G. (1994). Quantile regression, censoring and the structure of wages. Advances in Econometrics, ed. by C. Sims. Elsevier: New York.
[19] Kaldor, N. (1963). Capital Accumulation and Economic Growth, Lutz, F.A., Hague, D.C. (eds.), Proceedings of a Conference held by the International Economics Association, London: Macmillan.
[20] Kalecki, M. (1971). Selected Essays on the Dynamics of the Capital Economy. Cambridge UK: Cambridge University Press.
[21] Keynes, J.M. (1936). The General Theory of Employment, Interest, and Money, London: Macmillan.
[22] Ramsey, F. (1928). A Mathematical Theory of Saving. Economic Journal. Vol. 38, No 152, pp 543–559.
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    Pasquale Lucio Scandizzo, Maria Rita Pierleoni. (2018). The Distribution of Wealth and Real Growth in Italy: A Post-Keynesian Perspective. Economics, 7(2), 34-46. https://doi.org/10.11648/j.eco.20180702.12

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    Pasquale Lucio Scandizzo; Maria Rita Pierleoni. The Distribution of Wealth and Real Growth in Italy: A Post-Keynesian Perspective. Economics. 2018, 7(2), 34-46. doi: 10.11648/j.eco.20180702.12

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    AMA Style

    Pasquale Lucio Scandizzo, Maria Rita Pierleoni. The Distribution of Wealth and Real Growth in Italy: A Post-Keynesian Perspective. Economics. 2018;7(2):34-46. doi: 10.11648/j.eco.20180702.12

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  • @article{10.11648/j.eco.20180702.12,
      author = {Pasquale Lucio Scandizzo and Maria Rita Pierleoni},
      title = {The Distribution of Wealth and Real Growth in Italy: A Post-Keynesian Perspective},
      journal = {Economics},
      volume = {7},
      number = {2},
      pages = {34-46},
      doi = {10.11648/j.eco.20180702.12},
      url = {https://doi.org/10.11648/j.eco.20180702.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20180702.12},
      abstract = {This paper considers the problem of the determinants of income distribution in the light of the recent hypotheses advanced by Piketty on the evolution of the capitalistic system. It first reinterprets Piketty’s analysis in the context of a modified Cambridge model, where functional income distribution can adjust to ensure equality between a warranted rate and a natural rate of growth. The paper shows that this model yields some of the effects depicted by Piketty’s analysis through the rate of return to capital and the exogenous growth rate, if not only the functional, but also the personal distribution of income reacts to equilibrate the economy in response to divergent growth in the goods and labor markets. These results imply that the capital share of income and the share of the richer part of the population tend to move in the opposite direction in response to growth, so that, especially under declining growth, the fiscal treatment of capital and wealth should be different, with lower taxation for productive capital and increasing progressivity for income taxes. The main results of theoretical analysis are tested on data for the last 40 years of performance of the Italian economy, finding some significant consistency between the hypotheses formulated on the basis of the theoretical considerations above and the empirical evidence.},
     year = {2018}
    }
    

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    AU  - Maria Rita Pierleoni
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    AB  - This paper considers the problem of the determinants of income distribution in the light of the recent hypotheses advanced by Piketty on the evolution of the capitalistic system. It first reinterprets Piketty’s analysis in the context of a modified Cambridge model, where functional income distribution can adjust to ensure equality between a warranted rate and a natural rate of growth. The paper shows that this model yields some of the effects depicted by Piketty’s analysis through the rate of return to capital and the exogenous growth rate, if not only the functional, but also the personal distribution of income reacts to equilibrate the economy in response to divergent growth in the goods and labor markets. These results imply that the capital share of income and the share of the richer part of the population tend to move in the opposite direction in response to growth, so that, especially under declining growth, the fiscal treatment of capital and wealth should be different, with lower taxation for productive capital and increasing progressivity for income taxes. The main results of theoretical analysis are tested on data for the last 40 years of performance of the Italian economy, finding some significant consistency between the hypotheses formulated on the basis of the theoretical considerations above and the empirical evidence.
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Author Information
  • Center for Economic and International Studies (CEIS), Tor Vergata University, Rome, Italy

  • Department of Economic Planning, Presidency of Council of Ministers, Rome, Italy

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