Throughout the years, the focus of economic research and economic policy debates has shifted between growth and distribution. In the first decades after World War 2 the growth was high and thus, the consensus was that the distribution of wealth was not important. In the past decades the debate regarding distribution has risen again, following low growth in the 80’s 90’s. Today the distribution of wealth is one of the most discussed and controversial topics. According to Thomas Piketty, our knowledge on the development of the capital and the distribution on the long run are scarce. So far, the discussion has been a debate without data, but thanks to Thomas Pikettys revolutionary and extensive empirical work, that is no longer the case.

To investigate whether an increase in the gap between returns on capital and the output growth rate, will lead to an increase on the capital share of national income, is very important. Not only for economic science but also for the policy repercussions of such conclusions.

In Pikettys magnum opus, ‘Capital in the Twenty-First Century’ the French 19th century novelist Honoré de Balzac illustrates the huge significance of wealth, heritage and strategic marriages over education and employment. This was regarded as a well-known fact in the 1800s and the obscure fact that this once again is increasingly true today, is one of the most controversial points in Pikettys literary work. Piketty argues that, all other things constant, an increase of the difference between returns on capital and the output growth rate, will lead to an increase on the share of capital in national income. Furthermore, because that income from capital is more unequally distributed than income from labour, an increase in the capital share is likely to lead to increased income inequality – and over time – wealth inequality.

In Denmark, the personal income inequality was at its highest in 1970 and has since then declined until the 1990’s, where it once again started rising. This master thesis will investigate if the rising inequality will return to the levels from 1970. In addition, this thesis will also investigate how the inequality in Denmark will develop in twenty-first century if the current low growth scenario continuous, as Piketty predicts.

To answer these questions this thesis will use the same hypothesis as Piketty, using key figures from the Danish economy and extrapolate the outcome by simulating the Danish economy in the twenty-first century.

The findings show that the personal income inequality will exceed the level from 1970 after 93 periods in the simulation that imitates a Danish low growth scenario. In 1970 the income shares of the top 10 % was 33,3 % and, given the initial conditions, the simulation shows, that by the end of the twenty-first century the top 10 % of the population will have a 33,8 % share of the income. Furthermore, the wealth of the top 10 % is doubled after only 41 periods, which is significantly faster than the remaining population. This means that the wealth-share of the top 10 % is increasing throughout the simulation.