Does r-g cause wealth inequality? The case of the United States

Piketty claims that the gap between return to capital and growth rate (r−g) governs evolution of wealth inequality. This paper assesses its empirical validity using an IV approach almost one century US data. Our results are twofold: First, shares nonstationary, necessitating first differences draw a valid inference from any econometric exercise. is consistent with Piketty’s line argumentation casts doubt on studies inequality use levels without showing trending behavior Second, r−g played significant role in over last century, both statistically economically. In particular, can explain 50% increase since late 1970s.