A Neoclassical Model of Pension Capitalism in Which r > g

This paper presents a neoclassical overlapping generations model in which the rate of growth is positive, income distribution does not become more unequal in a steady state, and the real rate of return on wealth exceeds the rate of growth. The existence of two assets in the model distinguishes between capital and wealth. In contrast to Thomas Piketty's empirical results, no dynasties inherit wealth in the model, and no shocks occur to heterogeneous households in the same generation. Without such phenomena, the excess of the real rate of return on wealth over the rate of growth need not drive increased income inequality