A Statistical Equilibrium Model of Wealth Distribution
AbstractThe paper develops a theoretical model of endogenous wealth distribution, showing that a logarithmic mean constraint in the maximum entropy formalism leads to a power law distribution. On the level of economic theory, the model implies two trade-offs: first, the higher the aggregate growth of wealth portfolios and, second, the higher the average turnover activity in individual portfolios, the less equal the distribution of wealth. Empirical estimates of the power law exponent are extracted from Lorenz type data for different countries in different time periods and a numerical example illustrates the model.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2001 with number 214.
Date of creation: 01 Apr 2001
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Maximum entropy principle; statistical equilibrium; power laws; distribution of wealth;
Find related papers by JEL classification:
- C0 - Mathematical and Quantitative Methods - - General
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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- Domenico Delli Gatti & Corrado Di Guilmi & Mauro Gallegati & Simone Landini, 2012. "Reconstructing Aggregate Dynamics in Heterogeneous Agents Models. A Markovian Approach," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 117-146.
- Sheri M. Markose, 2005.
"Computability and Evolutionary Complexity: Markets as Complex Adaptive Systems (CAS),"
Royal Economic Society, vol. 115(504), pages F159-F192, 06.
- Sheri M. Markose, 2004. "Computability and Evolutionary Complexity: Markets As Complex Adaptive Systems (CAS)," Economics Discussion Papers 574, University of Essex, Department of Economics.
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