A Stochastic Model of Wealth Accumulation with Class Division. (31st May 2013)

• Record Type: Journal Article
• Authors: Russo, Alberto
• Is Part Of: Metroeconomica. Volume 65:Number 1(2014:Feb.)
• Page Start: 1
• Page End: 35
• Publication Date: 2013-05-31
• Subjects: Economics -- Periodicals; 330
• DOI: 10.1111/meca.12021
• Languages: English
• ISSNs: 0026-1386

Abstract

<abstract abstract-type="main"> <title>Abstract</title> <p>This paper is aimed at contributing to the literature on income and wealth inequality by proposing a simple stochastic model in which wealth accumulation depends on the 'social relation' between two classes: capitalists or workers. As a result, the society may evolve towards an unequal outcome with few rich and many poor individuals. We study the dynamic properties of the model by means of computer simulations. A maximum likelihood estimation procedure is applied to analyse the Pareto or power law tail of wealth distribution. We also provide a scenario analysis to explore the system's behaviour under alternative parameter settings.</p> </abstract>