Most of the modern rise in the capital share is land, not capital
The much-discussed rise in capital's share of income is, on decomposition, overwhelmingly a rise in the value of land under housing — vindicating a core Georgist claim.
The Claim
The rising share of national income flowing to "capital" in developed economies — popularised by Thomas Piketty's Capital in the Twenty-First Century — is, when decomposed, almost entirely a rise in the housing sector, and therefore largely a rise in land rent. Reproducible capital (machines, equipment, structures) shows little long-run increase in its income share; land does.
The Evidence in Numbers
| Study | Data | Finding |
|---|---|---|
| Rognlie (2015) | US + 7 advanced economies, postwar | The long-run rise in the net capital share is concentrated in housing; ex-housing, capital's share is roughly flat |
| Bonnet, Chapelle, Trannoy & Wasmer (2021) | French & European data | Rising wealth-to-income ratios are driven by land prices, not produced capital — independently confirming Rognlie |
The two teams used different countries and methods and reached the same conclusion: the "capital" in rising capital shares is mostly location.
Why It Matters
If inequality's capital dimension is really a land dimension, a tax on land values targets the actual driver — without the efficiency cost of taxing productive capital. This connects 21st-century inequality research directly to Henry George's 19th-century diagnosis in Progress and Poverty.
Strength of Evidence
Strong — independently replicated across US and European datasets by separate research teams.
See Also
Sources
- Matthew Rognlie (2015), "Deciphering the Fall and Rise in the Net Capital Share," Brookings Papers on Economic Activity — wiki summary · PDF
- Bonnet, Chapelle, Trannoy & Wasmer (2021), "Land is Back, It Should Be Taxed, It Can Be Taxed," European Economic Review — wiki summary · PDF