International and Domestic Trading and Wealth Distribution
AbstractWe introduce and discuss a kinetic model for wealth distribution in a simple market economy which is built of a number of countries or social groups. Our approach is based on the model with risky investments introduced by Cordier, Pareschi and one of the authors in  and borrows ideas from the kinetic theory of mixtures of rarefied gases. Wealth is exchanged by individuals inside these countries (domestic trade) as well as in between different countries (international trade). Under a suitable scaling we derive a system of Fokker-Planck type equations and discuss its extension to a two-dimensional model with distributed trading propensity. Theoretical and numerical results for two groups show that the wealth distribution develops a bimodal (and in general, a polymodal) shape.
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Bibliographic InfoPaper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 08-02.
Length: 16 pages
Date of creation: 01 Jan 2008
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-06 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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CoFE Discussion Paper
07-06, Center of Finance and Econometrics, University of Konstanz.
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