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Equality in Income and Sustainability in Economic Growth: Agent-Based Simulations on OECD Data

Author

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  • Shungo Sakaki

    (School of Media Science, Tokyo University of Technology, 1404-1 Katakura, Hachioji, Tokyo 192-0914, Japan)

Abstract

In countries that have developed under the current market economy, inequalities in income distribution tend to increase with three different trends, i.e., high (United States, United Kingdom, Japan), low (North Europe countries), and medium Gini coefficient levels. On the other hand, the relationship between income distribution and social welfare is generally a difficult problem to solve in economics. So, this paper discusses the impact of income distribution on the macroeconomy, limiting the scope to consistency with long-term economic growth. We attempt to answer these economic policy issues by simulation using an agent-based model based on replicator dynamics. As a result of the simulation in this paper, in general, in countries with the high marginal propensity to consume, long-term growth can be maintained by inducing equality in income distribution. On the other hand, a mature country with a low marginal propensity to consume can sustain not so high but stable growth despite increasing inequality in income distribution. According to simulation results based on OECD (Organisation for Economic Co-operation and Development) data, in the former UK, US, and Japan, the lower the Gini coefficient is, the higher the growth potential is, while in the latter Norway and Luxembourg, relatively stable growth is maintained even if the Gini coefficient increases.

Suggested Citation

  • Shungo Sakaki, 2019. "Equality in Income and Sustainability in Economic Growth: Agent-Based Simulations on OECD Data," Sustainability, MDPI, vol. 11(20), pages 1-32, October.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:20:p:5803-:d:278188
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    References listed on IDEAS

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    Cited by:

    1. Luigi Mastronardi & Aurora Cavallo, 2020. "The Spatial Dimension of Income Inequality: An Analysis at Municipal Level," Sustainability, MDPI, vol. 12(4), pages 1-18, February.
    2. Ionuț Jianu & Marin Dinu & Dragoș Huru & Alexandru Bodislav, 2021. "Examining the Relationship between Income Inequality and Growth from the Perspective of EU Member States’ Stage of Development," Sustainability, MDPI, vol. 13(9), pages 1-16, May.
    3. Miguel Blanco & Marcos Ferasso & Lydia Bares, 2021. "Evaluation of the Effects on Regional Production and Employment in Spain of the Renewable Energy Plan 2011–2020," Sustainability, MDPI, vol. 13(6), pages 1-14, March.

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