Marwil J. Dávila-Fernández
DEPS, USiena
Lionello F. Punzo
DEPS, USiena
Abstract
A long-standing interest in the relationship between inequality and sustainable growth continues to fascinate economists among other social scientists. It must be noted, however, that most empirical efforts have been focused on the income-inequality-growth nexus, while studies on wealth inequality are much more scarce. In this article, it is our purpose to fill such a gap in the literature by assessing the correspondence between the top 1 percent wealth-share and economic growth. Making use of time-series cointegration techniques, we study the experience of France and the United States between 1950 and 2014. Our estimates suggest that the growth rate of output is an inverted-U shaped function of the wealth-share of the top 1 percent. The estimated relationship is robust to variations in control variables and estimation methods. We compute a sort of optimal wealth-share, understood as the share of wealth compatible with the maximum rate of growth, and show that France is growing close to its long-run potential while the United States is significantly below it.
Keywords
Growth, wealth inequality, top wealth-shares, France, United States
Jel Codes
G01, C61, D84
