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A dynamic model of wealth segregation

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  • Eugenio Vicario

    (University of Florence)

Abstract

We propose a dynamic model where the real estate market generates wealth segregation within a town. The model develops on the Schelling’s checkerboard dynamics with one main difference: Agents are fully characterized by their wealth, which changes with the progress of the model dynamics. The driver of the segregation is a positive neighborhood externality such that households’ utility is increasing in the average wealth of the neighbors. The identification of a potential function enables prediction of the long-run limiting behavior of the dynamics: Wealth segregation is an endemic result, unless a perturbation at the individual level is introduced. Public policies that mimic the perturbation can reduce wealth segregation.

Suggested Citation

  • Eugenio Vicario, 2025. "A dynamic model of wealth segregation," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 20(3), pages 747-773, July.
    • Handle: RePEc:spr:jeicoo:v:20:y:2025:i:3:d:10.1007_s11403-024-00416-0
    DOI: 10.1007/s11403-024-00416-0
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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