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Inequality, mobility and the financial accumulation process: A computational economic analysis

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  • Yuri Biondi
  • Simone Righi

Abstract

Our computational economic analysis investigates the relationship between inequality, mobility and the financial accumulation process. Extending the baseline model by Levy et al., we characterise the economic process trough stylised return structures generating alternative evolutions of income and wealth through historical time. First we explore the limited heuristic contribution of one and two factors models comprising one single stock (capital wealth) and one single flow factor (labour) as pure drivers of income and wealth generation and allocation over time. Then we introduce heuristic modes of taxation in line with the baseline approach. Our computational economic analysis corroborates that the financial accumulation process featuring compound returns plays a significant role as source of inequality, while institutional configurations including taxation play a significant role in framing and shaping the aggregate economic process that evolves over socioeconomic space and time.

Suggested Citation

  • Yuri Biondi & Simone Righi, 2015. "Inequality, mobility and the financial accumulation process: A computational economic analysis," Department of Economics (DEMB) 0058, University of Modena and Reggio Emilia, Department of Economics "Marco Biagi".
    • Handle: RePEc:mod:dembwp:0058
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    Cited by:

    1. Dias, Thiago & Gonçalves, Sebastián, 2024. "Effectiveness of wealth-based vs exchange-based tax systems in reducing inequality," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 641(C).
    2. Nicolas Bouleau & Christophe Chorro, 2017. "The impact of randomness on the distribution of wealth: Some economic aspects of the Wright-Fisher diffusion process," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01138383, HAL.
    3. Nicolas Bouleau & Christophe Chorro, 2015. "The impact of randomness on the distribution of wealth: Some economic aspects of the Wright-Fisher diffusion process," Documents de travail du Centre d'Economie de la Sorbonne 15024r, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Jul 2015.
    4. Alan G. Isaac, 2021. "Wealth Inequality and the Financial Accumulation Process," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(3), pages 430-448, June.
    5. Yuri Biondi & Stefano Olla, 2020. "Financial accumulation implies ever-increasing wealth inequality," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(4), pages 943-951, October.
    6. Nicolas Bouleau & Christophe Chorro, 2015. "The impact of randomness on the distribution of wealth: Some economic aspects of the Wright-Fisher diffusion process," Post-Print halshs-01162452, HAL.
    7. Bouleau, Nicolas & Chorro, Christophe, 2017. "The impact of randomness on the distribution of wealth: Some economic aspects of the Wright–Fisher diffusion process," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 479(C), pages 379-395.
    8. Nicolas Bouleau & Christophe Chorro, 2017. "The impact of randomness on the distribution of wealth: Some economic aspects of the Wright-Fisher diffusion process," Post-Print hal-01138383, HAL.
    9. Francisco Cardoso, Ben-Hur & Gonçalves, Sebastián & Iglesias, José Roberto, 2023. "Why equal opportunities lead to maximum inequality? The wealth condensation paradox generally solved," Chaos, Solitons & Fractals, Elsevier, vol. 168(C).

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    More about this item

    Keywords

    inequality; economic process; compound interest; simple interest; taxation; minimal insti- tution; computational economics; econophysics;
    All these keywords.

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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