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Effects of network topology on wealth distributions

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  • Diego Garlaschelli
  • Maria I. Loffredo
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    Abstract

    We focus on the problem of how wealth is distributed among the units of a networked economic system. We first review the empirical results documenting that in many economies the wealth distribution is described by a combination of log--normal and power--law behaviours. We then focus on the Bouchaud--M\'ezard model of wealth exchange, describing an economy of interacting agents connected through an exchange network. We report analytical and numerical results showing that the system self--organises towards a stationary state whose associated wealth distribution depends crucially on the underlying interaction network. In particular we show that if the network displays a homogeneous density of links, the wealth distribution displays either the log--normal or the power--law form. This means that the first--order topological properties alone (such as the scale--free property) are not enough to explain the emergence of the empirically observed \emph{mixed} form of the wealth distribution. In order to reproduce this nontrivial pattern, the network has to be heterogeneously divided into regions with variable density of links. We show new results detailing how this effect is related to the higher--order correlation properties of the underlying network. In particular, we analyse assortativity by degree and the pairwise wealth correlations, and discuss the effects that these properties have on each other.

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    File URL: http://arxiv.org/pdf/0711.4710
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 0711.4710.

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    Date of creation: Nov 2007
    Date of revision: Jan 2008
    Publication status: Published in J. Phys. A: Math. Theor. 41, 224018 (2008)
    Handle: RePEc:arx:papers:0711.4710

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    Web page: http://arxiv.org/

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    1. Corrado Di Guilmi & Mauro Gallegati & Edoardo Gaffeo, 2003. "Power Law Scaling in the World Income Distribution," Economics Bulletin, AccessEcon, vol. 15(6), pages 1-7.
    2. Caldarelli, Guido, 2007. "Scale-Free Networks: Complex Webs in Nature and Technology," OUP Catalogue, Oxford University Press, number 9780199211517, September.
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