CAPITAL AND INEQUALITY

Abstract

Wealth inequality comes about mainly as a result of lifetime accumulation of capital and risky investment. Evidence from the Forbes Rich Lists show that in recent years volatility of the wealth of the richest has been very great. Randomness of returns to capital can explain a substantial part of global wealth inequality. As a consequence, inequality can best be reduced by a tax on returns to capital in excess of a normal rate of return, in addition to tax on labor earnings. (JEL D31).