Why money trickles up – wealth & income distributions
AbstractThis paper combines ideas from classical economics and modern finance with the general Lotka-Volterra models of Levy & Solomon to provide straightforward explanations of wealth and income distributions. Using a simple and realistic economic formulation, the distributions of both wealth and income are fully explained. Both the power tail and the log-normal like body are fully captured. It is of note that the full distribution, including the power law tail, is created via the use of absolutely identical agents. It is further demonstrated that a simple scheme of compulsory saving could eliminate poverty at little cost to the taxpayer.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 30851.
Date of creation: 01 May 2011
Date of revision:
wealth; income; lotka; volterra;
Other versions of this item:
- Geoff Willis, 2011. "Why Money Trickles Up - Wealth & Income Distributions," Papers 1105.2122, arXiv.org, revised May 2011.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-24 (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.:
- Acharya, Viral V & Pedersen, Lasse Heje, 2004.
"Asset Pricing with Liquidity Risk,"
CEPR Discussion Papers
4718, C.E.P.R. Discussion Papers.
- Angelo Ranaldo, 2006. "Intraday Market Dynamics Around Public Information Arrivals," Working Papers 2006-11, Swiss National Bank.
- Kurz,Heinz D. & Salvadori,Neri, 1997.
"Theory of Production,"
Cambridge University Press, number 9780521588676, December.
- A. Chatterjee & B. K. Chakrabarti, 2007. "Kinetic exchange models for income and wealth distributions," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 60(2), pages 135-149, November.
- Harvie, David, 2000. "Testing Goodwin: Growth Cycles in Ten OECD Countries," Cambridge Journal of Economics, Oxford University Press, vol. 24(3), pages 349-76, May.
- Pastor, Lubos & Stambaugh, Robert F., 2003.
"Liquidity Risk and Expected Stock Returns,"
Journal of Political Economy,
University of Chicago Press, vol. 111(3), pages 642-685, June.
- Lubos Pastor & Robert F. Stambaugh, 2001. "Liquidity Risk and Expected Stock Returns," NBER Working Papers 8462, National Bureau of Economic Research, Inc.
- Luboš Pástor & Robert F. Stambaugh, . "Liquidity Risk and Expected Stock Returns," CRSP working papers 531, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Pástor, Luboš & Stambaugh, Robert F, 2002. "Liquidity Risk and Expected Stock Returns," CEPR Discussion Papers 3494, C.E.P.R. Discussion Papers.
- Douglas Gollin, 2001.
"Getting Income Shares Right,"
Department of Economics Working Papers
2001-11, Department of Economics, Williams College.
- Matthieu Wyart & Jean-Philippe Bouchaud & Julien Kockelkoren & Marc Potters & Michele Vettorazzo, 2006.
"Relation between Bid-Ask Spread, Impact and Volatility in Double Auction Markets,"
Science & Finance (CFM) working paper archive
500067, Science & Finance, Capital Fund Management.
- Matthieu Wyart & Jean-Philippe Bouchaud & Julien Kockelkoren & Marc Potters & Michele Vettorazzo, 2006. "Relation between Bid-Ask Spread, Impact and Volatility in Double Auction Markets," Papers physics/0603084, arXiv.org, revised Mar 2007.
- Xavier Gabaix, 2009.
"Power Laws in Economics and Finance,"
Annual Review of Economics,
Annual Reviews, vol. 1(1), pages 255-294, 05.
- Gallegati, Mauro & Keen, Steve & Lux, Thomas & Ormerod, Paul, 2006. "Worrying trends in econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 1-6.
- Ben-Rephael, Azi & Kadan, Ohad & Wohl, Avi, 2008. "The diminishing liquidity premium," CFS Working Paper Series 2008/52, Center for Financial Studies (CFS).
- Pettis, Michael, 2001. "The Volatility Machine: Emerging Economies and the Threat of Financial Collapse," OUP Catalogue, Oxford University Press, number 9780195143300.
- Robert A. Korajczyk & Ronnie Sadka, 2003.
"Are Momentum Profits Robust to Trading Costs?,"
- Amihud, Yakov & Mendelson, Haim & Pedersen, Lasse Heje, 2005. "Liquidity and Asset Prices," MPRA Paper 24768, University Library of Munich, Germany.
- Ian Wright, 2004.
"The Social Architecture of Capitalism,"
cond-mat/0401053, arXiv.org, revised Mar 2011.
- Wright, Ian, 2005. "The social architecture of capitalism," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 346(3), pages 589-620.
- Wataru Souma & Makoto Nirei, 2005. "Empirical study and model of personal income," Papers physics/0505173, arXiv.org.
- Michael R. Pakko, 2004. "Labor's share," National Economic Trends, Federal Reserve Bank of St. Louis, issue Aug.
- Wright, Ian, 2009.
"Implicit Microfoundations for Macroeconomics,"
Economics - The Open-Access, Open-Assessment E-Journal,
Kiel Institute for the World Economy, vol. 3(19), pages 1-27.
- Arnab Chatterjee & Sitabhra Sinha & Bikas K. Chakrabarti, 2007. "Economic Inequality: Is it Natural?," Papers physics/0703201, arXiv.org, revised Mar 2007.
- Bouchaud, Jean-Philippe & Mézard, Marc, 2000. "Wealth condensation in a simple model of economy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 282(3), pages 536-545.
- Tarun Chordia & Asani Sarkar & Avanidhar Subrahmanyam, 2003. "An empirical analysis of stock and bond market liquidity," Staff Reports 164, Federal Reserve Bank of New York.
- Gaffeo, Edoardo & Gallegati, Mauro & Palestrini, Antonio, 2003. "On the size distribution of firms: additional evidence from the G7 countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 117-123.
- Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
- Goyenko, Ruslan Y. & Holden, Craig W. & Trzcinka, Charles A., 2009. "Do liquidity measures measure liquidity?," Journal of Financial Economics, Elsevier, vol. 92(2), pages 153-181, May.
- J. Doyne Farmer & Paolo Patelli & Ilija I. Zovko, 2003. "The Predictive Power of Zero Intelligence in Financial Markets," Papers cond-mat/0309233, arXiv.org, revised Feb 2004.
- Jean-Philippe Bouchaud & Marc Mezard, 2000. "Wealth condensation in a simple model of economy," Science & Finance (CFM) working paper archive 500026, Science & Finance, Capital Fund Management.
- Lee, Kuan-Hui, 2005. "The World Price of Liquidity Risk," Working Paper Series 2006-10, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
- Korajczyk, Robert A. & Sadka, Ronnie, 2008. "Pricing the commonality across alternative measures of liquidity," Journal of Financial Economics, Elsevier, vol. 87(1), pages 45-72, January.
- Stoll, Hans R., 2003. "Market microstructure," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 9, pages 553-604 Elsevier.
- Young, Andrew T., 2010. "One of the things we know that ain't so: Is US labor's share relatively stable?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 90-102, March.
- Tarun Chordia, 2005. "An Empirical Analysis of Stock and Bond Market Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 85-129.
- Jenkinson, T & Corbett, J, 1997. "How is Investment Financed? A Study of Germany, Japan, UK and US," Papers 16, American Institute for Contemporary German Studies-.
- Armand Joulin & Augustin Lefevre & Daniel Grunberg & Jean-Philippe Bouchaud, 2008. "Stock price jumps: news and volume play a minor role," Papers 0803.1769, arXiv.org.
- Arnab Chatterjee & Bikas K. Chakrabarti, 2007. "Kinetic Exchange Models for Income and Wealth Distributions," Papers 0709.1543, arXiv.org, revised Nov 2007.
- Chordia, Tarun & Roll, Richard & Subrahmanyam, Avanidhar, 2000. "Commonality in liquidity," Journal of Financial Economics, Elsevier, vol. 56(1), pages 3-28, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.