Not just r > g but r + q >> g: Piketty meets Ricardo in the long run of Indian history

Developing Economics

Wealth-income ratios are rising everywhere – they are not cyclical but rather unambiguously upward trending for the past three decades. Put simply, the accumulation of wealth is outpacing economic growth. This is true in America, Europe and Japan (Piketty and Zucman 2014), as well as China and Russia (Novokmet, Zucman & Yang 2018). In recent research (Kumar 2018), I found this same trend to persist in the world’s largest democracy – Indian wealth-income ratios have been rising since the 1970s. Why are these trends so similar in countries with such deep structural differences and distinct economic trajectories? By themselves, high wealth-income ratios are not necessarily a social dilemma – they may imply more wealth for everyone. But in general, there is a tendency for wealth to be more concentrated than income. As a result, a rise in wealth over income tends to increase wealth inequality. This is certainly the…

View original post 1,420 more words


The long run evolution of the rich in India 1937-2012

Developing Economics


Inequality in India may be returning to levels last seen during British Rule. To understand this, it is necessary to put India’s elite at the center of macro-history.

One of the central questions in political economy is how wealth evolves, particularly at the top. In Europe and the USA, we now accept that progression of wealth inequality followed a “U” shape or what has been called the “Inverted Kuznets Curve.” Briefly put, on the eve of World War I, the richest few percentiles dominated Western society with their massive wealth holdings. Fast forward to a decade after World War II and we see that their wealth declined substantially, but then started rising again in the late 1970s. Much has been written on this since (and due to) the publication of Piketty’s (2014) Capital in the 21st Century. My new and revised paper (Kumar, 2017b) puts the rich…

View original post 1,629 more words

New thoughts on US wealth inequality: Not simply asset price inflation but high savings and the capitalist spirit

My latest paper in the International Journal of Political Economy (Taylor & Francis)  is now up. This link leads to gated access. Amongst other things, I have developed a simple accounting formula to capture synthetic savings within fractiles. The abstract is summarized below:

Personal savings from top incomes and wealth accumulation in the United States: Results from disaggregated national accounts

This article explores the determinants and distribution of household wealth. Looking at U.S. data since 1980, it finds convincing evidence that top incomes were saved at high rates and contributed to the steady increase in the household wealth–income ratio. First, I rule out counterclaims regarding the role of housing and real estate prices finding little evidence of their influence on the trends and magnitudes of household net worth relative to disposable income. With savings as the remaining explanation, I present an accounting decomposition formula that captures savings rates for any reference group using the dynamics of intergroup accumulation rates. This methodology is applied to data from national accounts, balance sheets, and income distribution statistics in order to compute saving rates for the top 1 percent of households in the U.S. income distribution. The estimates also support the idea that top income earners have outsaved other households, thereby capturing an increasing share of wealth.

Upcoming talks in New York City

Tomorrow (10/25) I will be delivering a talk on wealth concentration in India at the NSSR Macro Lunch at The New School.

Location: Room D1008, 6 E 16th Street, New York from 12:30-2PM

November 3rd, I will be speaking as part of the Inequality Lecture Series at the City University of New York (CUNY) Stone Center/Luxembourg Income Study.

Location: Room 9204, CUNY Graduate Center from 3:30 – 5PM