Capital in the Twenty-First Century

by Thomas Piketty

if the growth rate increases to 3 percent, then β = s/g will fall to just four years of national income. If the savings rate simultaneously decreases slightly to s = 9 percent, then the long-run capital / income ratio will decline to 3. These effects are all the more significant because the growth rate that figures in the law β = s/g is the overall rate of growth of national income, that is, the sum of the per capita growth rate and the population growth rate.3 In other words, for a savings rate on the order of 10–12 percent and a growth rate of national income per capita on the order of 1.5–2 percent a year, it follows immediately that a country that has near-zero demographic growth and therefore a total growth rate close to 1.5–2 percent, as in Europe, can expect to accumulate a capital stock worth six to eight years of national income, whereas a country with demographic growth on the order of 1 percent a year and therefore a total growth rate of 2.5–3 percent, as in the United States, will accumulate a capital stock worth only three to four years of national income.