Long-Term Rates, Capital Shares, and Income Inequality

Edmond Berisha, John Meszaros

Research output: Contribution to journalArticle

Abstract

Using Piketty and Zucman’s (Q J Econ 129(3):1255-1310, 2014) recently published capital share data, this paper uses structural VARs to understand the relationship between long-term interest rates, capital shares, and the distribution of income in the United States. The results indicate that increases in capital shares increase income inequality. Moreover, the relationship between the interest rate and capital shares is found to be negative and statistically significant. The results suggest that low long-term rates, through an equity and business investment channel, further increase the unequal distribution of income in the U.S. The results further illuminate the channels through which monetary policy can potentially affect the distribution of income.

Original languageEnglish
JournalOpen Economies Review
DOIs
StatePublished - 1 Jan 2019

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Income inequality
Distribution of income
Interest rates
Business investment
Structural VAR
Equity
Monetary policy
Long-term interest rates

Keywords

  • Income inequality
  • Macroeconomic policy
  • Monetary policy

Cite this

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Long-Term Rates, Capital Shares, and Income Inequality. / Berisha, Edmond; Meszaros, John.

In: Open Economies Review, 01.01.2019.

Research output: Contribution to journalArticle

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