Economics of Inequality/Economie des inégalités

(Master APE, Paris School of Economics & EHESS)

Thomas Piketty

Academic year 2011-2012


Syllabus & Course Material

(February 2nd 2012)

 (check on line for updated versions)


Email :

Office hours: Tuesdays 9h-12h, Jourdan B101

Course web page :


The objective of this course is to present recent research in the area of income and wealth distribution. Issues will include the following. How did income and wealth distributions evolve since the 19th century, how can we account for these changes? What was the interaction with the growth and capital accumulation process? Do existing models of growth and distribution properly account for these facts? Did the recent rise of inequality contribute to the 2007-2010 financial crisis? What will be the impact of the crisis on the structure of income and wealth distributions?


This course will take for the most part a positive perspective on distributional issues. For references on normative models of optimal taxation and redistribution, see the syllabus of my Public Economics course (or other courses). See also previous years' syllabuses.


The course is organized in 8 lectures of 3 hours. To validate the course, students are required (1) to attend and actively participate to all lectures; (2) to take the exam.


Lecture 1: Tuesday November 29th 2011, 15h-18h, Grande salle Jourdan

Lecture 2: Tuesday December 6th 2011, 15h-18h, Grande salle Jourdan

Lecture 3: Tuesday January 10th 2012, 15h-18h, Grande salle Jourdan

Lecture 4: Tuesday January 17th 2012, 15h-18h, Grande salle Jourdan

Lecture 5: Tuesday January 24th 2012, 15h-18h, Grande salle Jourdan

Lecture 6: Tuesday January 31st 2012, 15h-18h, Grande salle Jourdan

Lecture 7: Tuesday February 7th 2012, 15h-18h, Grande salle Jourdan

Lecture 8/Exam: Wednesday February 15th 2012, 14h30-16h30, Grande salle Jourdan


General textbooks and references


A. Atkinson, The economics of inequality, Clarendon Press, 1983

A. Atkinson, F. Bourguignon, Handbook of Income Distribution, North-Holland, 2000

A. Atkinson, T. Piketty, Top incomes over the twentieth century, volumes 1 & 2, Oxford University Press, 2007 & 2010

G. Bertola, R. Foellmi, J. Zweimuller, Income distribution in macroeconomic models, Princeton University Press, 2006

D. G. Champernowne, F. Cowell, Economic Inequality and Income Distribution, Cambridge University Press 1998

T. Piketty, L’économie des inégalités, La Découverte, collection « Repères », 1997

T. Piketty, Les hauts revenus en France au 20ème siècle – Inégalités et redistributions, 1901-1998, Grasset, 2001

T. Piketty, « On the Long Run Evolution of Inheritance – France 1820-2050 », Working Paper PSE 2010  QJE 2011




Week 1. Capital vs Labor – Basic models and facts


Be careful with data sources

(a) National income and wealth accounts

(b) Income and wealth surveys (Insee: Budget, Emploi, Logement, Patrimoine, etc.)

(c) Administrative income and wealth tax files (RF, IR, ISF, ISu, IS, etc.)


Income = Capital income + Labor income: Y = F(K,L) = YK+YL


Course Notes: Basic Models of Inequality - Capital vs Labor


Capital vs Labor: from Abstract Concepts to Measurement

See Distribution of Income & Wealth in France 2010

See Macro Accounting of Income & Wealth in France 2010 (excel format)

Capital vs Labor: from Economics to Culture 

See N. Fremeaux, "Do we choose our spouse according to inheritance or labor income?", PSE 2012


Week 2. Factor Shares and Wealth-Income Ratios in the Long Run


Question 1: Are labor & capital shares (factor shares) stable in the long run, & why?

See Course Notes on Factor Shares and Production Functions

[Selected figures on factor shares and wealth-income ratios in France 1820-2008]

See Course Notes on the measurement of factor shares and wealth-income ratios


Question 2: Are wealth-income ratios stable in the long run, & why?

Is balanced growth possible?

See Course Notes on Models of Growth and Capital accumulation





Week 3. The Rise of Income Inequality & the Financial Crisis

Historical evolution of top income shares:


World Top Incomes Database


A.Atkinson,T. Piketty & E. Saez, “Top Incomes in the Long Run of History”, JEL 2011

Exemple of raw income tax data: France 1919

Top shares vs Gini coefficients:

See F. Alvareto, A note on the relationship between top income shares and Gini coefficients, Economics letters 2011


Did rising inequality contribute to financial fragility and macroeconomic unstability?

H.Kumhof, R.Rancière, “Inequality, Leverages, and Crises”, PSE and IMF, 2010


P.Aghion, A.Banerjee, T.Piketty, “Dualism and Macroeconomic Volatility”, QJE 1999



Week 4. Why Are the Working Rich so Rich?

Institutions (taxes, social norms, governance pb, etc.) vs market forces (global competition for talent, superstars, skill-biased technical change, etc.): on-going debate

T. Piketty, E. Saez & S. Stantcheva, “Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities”, WP 2011 Slides

R. Burckhauser, S. Feng, S. Jenkins, and J. Larrimore, “Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data”, mimeo, 2009 [article in pdf format]

S. Kaplan and J. Rauh, “Wall Street and Main Street: What Contributes to the Rise of the Highest Incomes?”, Review of Financial Studies, 2009 [article in pdf format]

O. Godechot, "Finance and the rise of inequalities in France", WP PSE 2011

M. Bertrand and S. Mullainathan, “Do CEOs Set Their Own Pay ? The Ones Without Principals Do”, Quarterly Journal of Economics 116 (3) (August 2001), pp.901-932 [article in pdf format]

X. Gabaix and A. Landier, “Why Has CEO Pay Increased so Much?”, Quarterly Journal of Economics 2008 [article in pdf format]

C. Frydman and R. Molloy, “Does Tax Policy Affect Executive Compensation? Evidence from Postwar Tax Reforms”, mimeo, 2009  [article in pdf format]

J. Rotemberg, “Perceptions of Equity and the Distribution of Income”, Journal of Labor Economics 2002  [article in pdf format]

M. Tervio, “Superstars and Mediocrities: Market Failure in the Discovery of Talent”, RES 2009

E. Saez, J. Slemrod and S. Gierz, “The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review”, NBER Working Paper 15012 (2009) [article en format pdf]


Have the working rich really replaced old-style rentiers? Measurement issues (capital income under-estimated in tax data) vs timing issues (wealth accumulation takes time)

E. Wolff, A. Zacharias, “Household Wealth & the Measurement of Economic Well-Being in the United States”, Journal of Economic Inequality 2009



Weeks 5 & 6. Wealth Accumulation and Distribution – Models and facts

Historical series on wealth inequality:


Exemple of raw estate tax data: US 2000-2010

Same Pareto interpolation techniques as with income tax data

(+mortality multiplier techniques to go from the wealth of decedents to the wealth of the living)

Basic references on long run wealth inequality series:

Lampman 1962 (US) and Atkinson-Harrison 1978 (UK)

(equivalent of Kuznets 1953 on long run income inequality series)

Top wealth shares series available for fewer countries than top income shares series:

 W. Kopczuk et E. Saez, « Top Wealth Shares in the United States, 1916-2000 – Evidence from Estate Tax Returns », National Tax Journal 2004

T. Piketty, G. Postel-Vinay et J.L. Rosenthal, “Wealth Concentration in a Developping Economy: Paris and France, 1807-1994”, AER 2006

J. Roine and D. Waldenstrom, “Wealth Concentration over the Path of Development: Sweden, 1873-2005”, Scandinavian Journal of Economics 2009

Three facts:

(1) Wealth distribution always much more unequal than income distribution

(2) Inequality peak involves steeply-rising age-wealth profiles

→ lifecycle model not enough; multiplicative wealth model necessary

(3) Inequality decline initiated by WW1&2 shocks; why permanent?

(3a) Human K revolution: decline in α and r=α/β? or g effect?

(3b) Lifecycle revolution: class war replaced by war of ages?

(3c) Progressive taxation (and/or inflation?)

→ open issues


Why is wealth distribution so much more unequal than income distribution?

See Course Notes on Models of Wealth Accumulation & Distribution


Kotlikoff, L and L. Summers, “The Role of Intergenerational Transfers in Aggregate Capital Accumulation”, JPE 1981 

F. Modigliani, “Life Cycle, Individual Thrift and the Wealth of Nations”, AER 1986

 T. Piketty "On the Long Run Evolution of Inheritance", WP 2010 and QJE 2011



Week 7: The World Distribution of Income and Wealth & Global Imbalances 

Global income accounts and distributions:

Bourguignon, François and Christian Morrison, “Inequality Among World Citizens: 1820-1992,"
American Economic Review 92(4), (2002), 727-744.

"The World Distribution of Income: Falling Poverty and… Convergence, Period", Quarterly Journal of Economics, Vol. 121, No. 2: 351-397, May 2006

Global wealth accounts and distributions:

J. Davies et al, “The Level and Distribution of Global Household Wealth”, NBER 2009 

J.Davies, A.Shorrocks, “Global Wealth Report”, Credit Suisse 2010   Databook



External wealth accounts: NFAt+1 = NFAt + Xt-Mt + rtNFAt 

P. Lane, G. Milesi-Ferreti, “The External Wealth of Nations, Mark II”, JIE 2007


G. Milesi-Ferretti, “Global Rebalancing”, IMF 2010 

P.O. Gourinchas, H. Rey, « International Financial Adjustment », JPE 2007 

P.O. Gourinchas, H.Rey, “Exorbitant Privilege & Exorbitant Duty”, 2010



Tax havens and missing wealth: 

G. Zucman, “The Missing Wealth of Nations”, PSE, 2011

G. Zucman, "The End of Bank Secrecy?", PSE, 2012

See also « Tax Havens and Development », Commission on Capital Flight 2009