DP2876 Income Inequality in France 1901-98

Author(s): Thomas Piketty

Publication Date: July 2001

Keyword(s): wage distribution , capital accumulation , income distribution

JEL(s): D63 , E25 , N34

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP2876.asp

The objective of this research is to document and to explain trends in inequality in 20th century France. Data from income tax returns (1915-98), wage tax returns (1919-98) and inheritance tax returns (1902-94), is used in order to compute fully homogeneous, yearly estimates of income inequality, wage inequality and wealth inequality. The main conclusion is that the decline in income inequality that took place during the first half of the 20th century was mostly accidental. In France and possibly in a number of other developed countries as well wage inequality has actually been extremely stable in the long run, and the secular decline in income inequality is for the most part a capital income phenomenon. Holders of very large fortunes were severely hit by major shocks during the 1914-45 period, and were never able to fully recover from these shocks, probably because of the dynamic effects of progressive taxation on capital accumulation and pre-tax income inequality.