Journal
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
Volume 516, Issue -, Pages 423-442Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.physa.2018.10.042
Keywords
Affine Wealth Model; Extended Yard-Sale Model; Yard-Sale Model; Asset Exchange Model; Lorenz curve; Wealth inequality; Gini coefficient; Phase transitions; Phase coexistence; Wealth condensation; Wealth-attained advantage; Duality
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Funding
- Fondation Mathematique Jacques Hadamard, France
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We present a stochastic, agent-based, binary-transaction Asset-Exchange Model (AEM) for wealth distribution that allows for agents with negative wealth. This model retains certain features of prior AEMs such as redistribution and wealth-attained advantage, but it also allows for shifts as well as scalings of the agent density function. We derive the Fokker Planck equation describing its time evolution and we describe its numerical solution, including a methodology for solving the inverse problem of finding the model parameters that best match empirical data. Using this methodology, we compare the steady-state solutions of the Fokker-Planck equation with data from, inter alia, the United States Survey of Consumer Finances over a time period of 27 years. In doing so, we demonstrate agreement with empirical data with an average error less than 0.16% over this time period. We present the model parameters for the US wealth distribution data as a function of time under the assumption that the distribution responds to their variation adiabatically. We argue that the time series of model parameters thus obtained provides a valuable new diagnostic tool for analyzing wealth inequality. (C) 2018 Elsevier B.V. All rights reserved.
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