Economist Thomas Piketty rocked the socialist world in 2013 with a very detailed tome (Capital in the Twenty-First Century) on why capitalism is not a good or humane way to run things. Unfortunately for Mr. Piketty, the numbers have not been adding up: here, here, here, here and here and lots more if you want to Google them.
Now this paper from the International Monetary Fund
Testing Piketty’s Hypothesis on the Drivers of Income Inequality : Evidence from Panel VARs with Heterogeneous Dynamics
Thomas Piketty's Capital in the Twenty-First Century puts forth a logically consistent explanation for changes in income and wealth inequality patterns. However, while rich in data, the book provides no formal empirical testing for its theoretical causal chain. In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.
Somehow, I do not think that you get published through the International Monetary Fund if you are a slouch as an economist. Piketty was a great rallying point for socialists and money-redistributionists but - like I said earlier - the numbers simply do not add up. Capitalism rocks, everything else fails repeatedly (see: Venezuela, Zimbabwe, U.S.S.R. and Mao's China to start).
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