Answer to Question #106730 in Economics for Luna Penn

Question

Assume in country A the rate of return to capital is 4% and the real growth rate of the economy is 3%. Assume in country B the rate of return to capital is 5% and the real growth rate of the economy is 6%. According to Piketty, which country is more likely to have persistent inequality in wealth? Explain.

Answer 1

According to Piketty country B is more likely to have persistent inequality in wealth, because its rate of return to capital of 5% and the real growth rate of the economy of 6% are higher than in country A.