An agent-based model of the observed distribution of wealth in the United States

Authored by Hunter A Vallejos, James J Nutaro, Kalyan S Perumalla

Date Published: 2018

DOI: 10.1007/s11403-017-0200-9

Sponsors: United States Department of Energy (DOE)

Platforms: C++ Python

Model Documentation: Other Narrative Pseudocode Mathematical description

Model Code URLs: http://web.ornl.gov/~nutarojj/wealth_model.zip

Abstract

Pareto cautiously asserted that the wealth and income distributions which bear his name are universal, basing his argument on observations of this distribution in many different types of economies. In this paper, we present an agent based model (and a scalable approximation of it) in a closely related spirit. The central feature of this model is that wealth enables an individual to secure more wealth. Specifically, the important and novel feature of this model is its ability to simultaneously produce both the Pareto distribution observed in empirical data for the top 10\% of the population and the exponential distribution observed for the lower 90\%. We show that the model produces these distributions of wealth when initialized with an equitable distribution. Then, using historical data, we initialize the model with US wealth shares in 1988 and show that the model tracks wealth share changes from 1988 to 2012. Simulations to 2088 project that the top 0.01\% of the population will possess more than 70\% of the total wealth in the economy.

Tags

Agent-based model wealth Inequality law income Pareto Boltzmann-gibbs