Dynamics of wealth inequality

Publication date: Available online 13 June 2019Source: Comptes Rendus PhysiqueAuthor(s): Zdzislaw Burda, Pawel Wojcieszak, Konrad ZuchniakAbstractWe study an agent-based model of evolution of wealth distribution in a macroeconomic system. The evolution is driven by multiplicative stochastic fluctuations governed by the law of proportionate growth and interactions between agents. We are mainly interested in interactions increasing wealth inequality, that is, in a local implementation of the accumulated advantage principle. Such interactions destabilise the system. They are confronted in the model with a global regulatory mechanism that reduces wealth inequality. There are different scenarios emerging as a net effect of these two competing mechanisms. When the effect of the global regulation (economic interventionism) is too weak, the system is unstable and it never reaches equilibrium. When the effect is sufficiently strong, the system evolves towards a limiting stationary distribution with a Pareto tail. In between there is a critical phase. In this phase, the system may evolve towards a steady state with a multimodal wealth distribution. The corresponding cumulative density function has a characteristic stairway pattern that reflects the effect of economic stratification. The stairs represent wealth levels of economic classes separated by wealth gaps. As we show, the pattern is typical for macroeconomic systems with a limited economic freedom. One can find such a multimodal ...

Source: Comptes Rendus Physique - June 13, 2019 Category: Physics Source Type: research