Income inequality has been a popular economic discussion in developed countries. One study suggests a new approach to looking at the problem. From the end of World War II to the 1970’s the share of income going to capital was mostly trending downwards. From the 1970’s to today, though, that trend has switched upwards. During this time the share of income going to capital has ranged from around 20%-30%. A recent study from Matthew Rognlie from the Massachusetts Institute of Technology shows that the rise in capital across developed countries has mostly come from housing. He argues that people are getting rich off their homes. In terms of income inequality, Rognlie suggests concern should be shifted away from the split between capital and labor, and more towards variables such as within-labor distribution of income.
His reason being no! – ban that phrase! that the divide between capital and labor is more about housing. What do you think about Rognlie’s different approach to income inequality in developed countries?