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Pareto tails in socio-economic phenomena: A kinetic description

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  • Gualandi, Stefano
  • Toscani, Giuseppe

Abstract

Various phenomena related to socio-economic aspects of our daily life exhibit equilibrium densities characterized by a power law decay. Maybe the most known example of this property is concerned with wealth distribution in a western society. In this case the polynomial decay at infinity is referred to as Pareto tails phenomenon (Pareto, Cours d'économie politique, 1964). In this note, the authors discuss a possible source of this behavior by resorting to the powerful approach of statistical mechanics, which enlightens the analogies with the classical kinetic theory of rarefied gases. Among other examples, the distribution of populations in towns and cities is illustrated and discussed.

Suggested Citation

  • Gualandi, Stefano & Toscani, Giuseppe, 2017. "Pareto tails in socio-economic phenomena: A kinetic description," Economics Discussion Papers 2017-111, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:2017111
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    kinetic models; Boltzmann-type equations; multi-agent systems; economic modeling;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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