A Trade-Investment Model for Distribution of Wealth
arXiv:cond-mat/0306579 · doi:10.1016/j.physd.2004.01.031
Abstract
Econophysics provides a strategy for understanding the potential mechanisms underlying the anomalous distribution of wealth found in real societies. We present a computational nonlinear stochastic model for the distribution of wealth that depends upon three parameters and two mechanisms: trade and investment. To avoid economic paradoxes, the trade mechanism is assumed to be related to the poorer trader's wealth and to statistically advantage the poorer of the two traders. The two mechanisms together are shown to generate a distribution that reproduces the full range of the empirical wealth distribution, and not only the inverse power-law tail that Pareto found in western societies at the end of the 19th century.
23 pages, 8 figures, 2 tables- in press on a special issue of Physica D to be entitled "Anomalous Distributions, Nonlinear Dynamics, and Nonextensivity" (2003). This paper is part of a conference proceedings for the international Workshop on Anomalous Distributions, Nonlinear Dynamics and Nonextensivity, Nov 6-9 2002, Santa Fe (NM). The work was presented by N. Scafetta
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