The Effect of Growth on the Capital Stock: Comparing the Predictions of Piketty’s Second Law to Solow and Ramsey
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
In this paper I look at the connection between the steady-state growth rate and the Capital/Income ratio. The focus in particular is on how Piketty’s second fundamental law of capitalism differs from the conventional Solow and Ramsey models as well as how well it fits with statistical data. My conclusion is that the second fundamental law exhibits a substantial difference compared to the other two in how the Capital/Income ratio, Gross Savings rate and Net Savings rate are affected by a change in the rate of growth. It does not appear to be consistent with the data either from the Pennsylvania World Tables database or Piketty’s own statistics both of which are more similar to the Solow and Ramsey models’ predictions.
Place, publisher, year, edition, pages
Piketty, Second fundamental law, Capital/income ratio
IdentifiersURN: urn:nbn:se:uu:diva-242933OAI: oai:DiVA.org:uu-242933DiVA: diva2:785439
Gottfries, Nils, Professor
Guvå, Tomas, Universitetsadjunkt