Agent-based model of the effect of globalization on inequality and class mobility

Authored by Theodore Kolokolnikov, Joep H M Evers, David Iron, John Rumsey

Date Published: 2017

DOI: 10.1016/j.physd.2017.08.009

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

We consider a variant of the Bouchaud-Mezard model for wealth distribution in a society which incorporates the interaction radius between the agents, to model the extent of globalization in a society. The wealth distribution depends critically on the extent of this interaction. When interaction is relatively local, a small cluster of individuals emerges which accumulate most of the society's wealth. In this regime, the society is highly stratified with little or no class mobility. As the interaction is increased, the number of wealthy agents decreases, but the overall inequality rises as the freed-up wealth is transferred to the remaining wealthy agents. However when the interaction exceeds a certain critical threshold, the society becomes highly mobile resulting in a much lower economic inequality (low Gini index). This is consistent with the Kuznets upside-down U shaped inequality curve hypothesis. (C) 2017 Elsevier B.V. All rights reserved.

Tags

wealth Distributions money Statistical-mechanics Income inequality Wealth hot-spots Wealth mobility Great gatsby curve Kuznets curve