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Is wealth inequality reversible? A surveying parallel evolution with complex economic system

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Listed:
  • Wang, Zhixin
  • Guo, Ju-e
  • Song, Pengcheng
  • Zhang, Xuan

Abstract

This paper builds a stochastic complex economic system with financial markets. We not only solve the closed-form solution of heterogeneous agent's consumption with the quadratic utility but also release the constraint of the equilibrium condition between aggregated wealth and aggregated investment weights. We simulate the system by High Performance Computing and achieve the wealth inequality parallel evolution satisfying the premise of social welfare, agent's utilities, and Total Factor Productivity to be endogenously optimal. The results show the financial structure, labor force's welfare and risk aversion of consumption are significant determinants of wealth inequality. More specifically, there is an approximate “smile” relationship between the equity financing fraction and the wealth inequality at each stage. The overloading or shortage of equity financing could further accelerate wealth inequality. Finally, our results suggest that the trend of wealth inequality cannot be stopped but only slowed.

Suggested Citation

  • Wang, Zhixin & Guo, Ju-e & Song, Pengcheng & Zhang, Xuan, 2023. "Is wealth inequality reversible? A surveying parallel evolution with complex economic system," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000211
    DOI: 10.1016/j.frl.2023.103647
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    References listed on IDEAS

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    More about this item

    Keywords

    Wealth inequality; Complex economic system; Determinants of wealth inequality; Financial structure;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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