Revisiting r > g - The asymptotic dynamics of wealth inequality

Authored by Yonatan Berman, Yoash Shapira

Date Published: 2017

DOI: 10.1016/j.physa.2016.10.035

Sponsors: No sponsors listed

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Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

Studying the underlying mechanisms of wealth inequality dynamics is essential for its understanding and for policy aiming to regulate its level. We apply a heterogeneous non-interacting agent-based modeling approach, solved using iterated maps to model the dynamics of wealth inequality based on 3 parameters the economic output growth rate g, the capital value change rate a and the personal savings rate s and show that for a < g the wealth distribution reaches an asymptotic shape and becomes close to the income distribution. If a > g, the wealth distribution constantly becomes more and more inegalitarian. We also show that when a < g, wealth is asymptotically accumulated at the same rate as the economic output, which also implies that the wealth-disposable income ratio asymptotically converges to s/ (g - a). (C) 2016 Elsevier B.V. All rights reserved.

Tags

Wealth inequality econophysics Economic growth Income inequality