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Effect of segregation on inequality in kinetic models of wealth exchange

Author

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  • Lennart Fernandes

    (Theory of Quantum and Complex Systems, Universiteit Antwerpen)

  • Jacques Tempere

    (Theory of Quantum and Complex Systems, Universiteit Antwerpen)

Abstract

Empirical distributions of wealth and income can be reproduced using simplified agent-based models of economic interactions, analogous to microscopic collisions of gas particles. Building upon these models of freely interacting agents, we explore the effect of a segregated economic network in which interactions are restricted to those between agents of similar wealth. Agents on a 2D lattice undergo kinetic exchanges with their nearest neighbours, while continuously switching places to minimize local wealth differences. A spatial concentration of wealth leads to a steady state with increased global inequality and a magnified distinction between local and global measures of combatting poverty. Individual saving propensity proves ineffective in the segregated economy, while redistributive taxation transcends the spatial inhomogeneity and greatly reduces inequality. Adding fluctuations to the segregation dynamics, we observe a sharp phase transition to lower inequality at a critical temperature, accompanied by a sudden change in the distribution of the wealthy elite. Graphical abstract

Suggested Citation

  • Lennart Fernandes & Jacques Tempere, 2020. "Effect of segregation on inequality in kinetic models of wealth exchange," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 93(3), pages 1-8, March.
    • Handle: RePEc:spr:eurphb:v:93:y:2020:i:3:d:10.1140_epjb_e2020-100534-7
    DOI: 10.1140/epjb/e2020-100534-7
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    Cited by:

    1. Istvan Gere & Szabolcs Kelemen & Geza Toth & Tamas Biro & Zoltan Neda, 2021. "Wealth distribution in modern societies: collected data and a master equation approach," Papers 2104.04134, arXiv.org.
    2. Monaco, Andrea & Ghio, Matteo & Perrotta, Adamaria, 2024. "Wealth dynamics in a multi-aggregate closed monetary system," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 646(C).
    3. Tao, Yong, 2021. "Boltzmann-like income distribution in low and middle income classes: Evidence from the United Kingdom," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 578(C).
    4. Gere, István & Kelemen, Szabolcs & Tóth, Géza & Biró, Tamás S. & Néda, Zoltán, 2021. "Wealth distribution in modern societies: Collected data and a master equation approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 581(C).
    5. Max Greenberg & H. Oliver Gao, 2024. "Twenty-five years of random asset exchange modeling," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 97(6), pages 1-27, June.
    6. Cottineau-Mugadza, Clémentine, 2024. "Economic inequality and economic segregation: a systematic review of causal pathways," SocArXiv qxket, Center for Open Science.

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    Keywords

    Statistical and Nonlinear Physics;

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