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Wealth disparities and economic flow: Assessment using an asset exchange model with the surplus stock of the wealthy

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  • Takeshi Kato
  • Yoshinori Hiroi

Abstract

How can we limit wealth disparities while stimulating economic flows in sustainable societies? To examine the link between these concepts, we propose an econophysics asset exchange model with the surplus stock of the wealthy. The wealthy are one of the two exchange agents and have more assets than the poor. Our simulation model converts the surplus contribution rate of the wealthy to a new variable parameter alongside the saving rate and introduces the total exchange (flow) and rank correlation coefficient (metabolism) as new evaluation indexes, adding to the Gini index (disparities), thereby assessing both wealth distribution and the relationships among the disparities, flow, and metabolism. We show that these result in a gamma-like wealth distribution, and our model reveals a trade-off between limiting disparities and vitalizing the market. To limit disparities and increase flow and metabolism, we also find the need to restrain savings and use the wealthy surplus stock. This relationship is explicitly expressed in the new equation introduced herein. The insights gained by uncovering the root of disparities may present a persuasive case for investments in social security measures or social businesses involving stock redistribution or sharing.

Suggested Citation

  • Takeshi Kato & Yoshinori Hiroi, 2021. "Wealth disparities and economic flow: Assessment using an asset exchange model with the surplus stock of the wealthy," PLOS ONE, Public Library of Science, vol. 16(11), pages 1-16, November.
    • Handle: RePEc:plo:pone00:0259323
    DOI: 10.1371/journal.pone.0259323
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    References listed on IDEAS

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    1. Takeshi Kato & Yasuyuki Kudo & Hiroyuki Mizuno & Yoshinori Hiroi, 2020. "Regional Inequality Simulations Based on Asset Exchange Models with Exchange Range and Local Support Bias," Applied Economics and Finance, Redfame publishing, vol. 7(5), pages 10-23, September.
    2. A. Chatterjee & B. K. Chakrabarti, 2007. "Kinetic exchange models for income and wealth distributions," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 60(2), pages 135-149, November.
    3. Sebastian Guala, 2009. "Taxes in a Wealth Distribution Model by Inelastically Scattering of Particles," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 7(1), pages 1-7.
    4. Arnab Chatterjee & Bikas K. Chakrabarti, 2007. "Kinetic Exchange Models for Income and Wealth Distributions," Papers 0709.1543, arXiv.org, revised Nov 2007.
    5. Anirban Chakraborti, 2002. "Distributions Of Money In Model Markets Of Economy," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 13(10), pages 1315-1321.
    6. Takeshi Kato & Yasuyuki Kudo & Hiroyuki Mizuno & Yoshinori Hiroi, 2020. "Regional Inequality Simulations Based on Asset Exchange Models with Exchange Range and Local Support Bias," Papers 2002.09272, arXiv.org, revised Jul 2020.
    7. Arnab Chatterjee & Bikas K. Chakrabarti & S. S. Manna, 2003. "Pareto Law in a Kinetic Model of Market with Random Saving Propensity," Papers cond-mat/0301289, arXiv.org, revised Jan 2004.
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