Wealth Distribution Models with Regulations: Dynamics and Equilibria

Abstract

Simple agent based exchange models are a commonplace in the study of wealth distribution in an artificial economy. Generally, in a system that is composed of many agents characterized by their wealth and risk-aversion factor, two agents are selected sequentially and randomly to exchange wealth, allowing for its redistribution. Here we analyze how the effect of a social protection policy, which favors agents of lower wealth during the exchange, influences stability and some relevant economic indicators of the system. On the other hand, we study how periods of interruption of these policies produce, in the short and long term, changes in the system. In most cases, a steady state is reached, but with varying relaxation times. We conclude that regulations may improve economic mobility and reduce inequality. Moreover, our results indicate that the removal of social protection entails a high cost associated with the hysteresis of the distribution of wealth. Economic inequalities increase during a period without social protection, but also they remain high for an even longer time and, in some extreme cases, inequality may be irreversible, indicating that the withdrawal of social protection yields a high cost associated with the hysteresis of the distribution of wealth.

arXiv comment11 pages, 15 figures

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• A simple and efficient kinetic model for wealth distribution with saving propensity effect: based on lattice gas automaton
• A combined model of aggregation, fragmentation, and exchange processes: insights from analytical calculations
• Wealth distribution in modern societies: collected data and a master equation approach
• Mean-field theory of an asset exchange model with economic growth and wealth distribution
• Nonlinear redistribution of wealth from a stochastic approach
• Wealth distribution on a dynamic complex network
• Kinetic modeling of economic markets with heterogeneous saving propensities
• Scaling in local to global condensation of wealth on sparse networks
• Comments on mathematical aspects of the Biró-Néda model
• Inequality in a model of capitalist economy
• Wages and Capital returns in a generalized Pólya urn
• Limiting risk to reduce inequality: insights from the Yard-Sale model