As is well-known, Thomas Piketty made some dire predictions for inequality in his book. Roughly speaking, the idea is that low productivity growth will lead to ever-expanding inequality. While Piketty’s empirical contributions are well received (though there are critics), his main conclusions and policy recommendations are based on his theoretical framework, which has been widely criticized. It is thus not an exaggeration to say that the consensus among leading economists is that Piketty’s theory (and consequently his conclusions) are flawed.

So what happens if we study the question of inequality in a standard macroeconomic model? Does inequality increase as growth falls? And if yes, are such increases huge or are they negligible?