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Universal patterns of inequality

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  • Anand Banerjee
  • Victor M. Yakovenko

Abstract

Probability distributions of money, income, and energy consumption per capita are studied for ensembles of economic agents. The principle of entropy maximization for partitioning of a limited resource gives exponential distributions for the investigated variables. A non-equilibrium difference of money temperatures between different systems generates net fluxes of money and population. To describe income distribution, a stochastic process with additive and multiplicative components is introduced. The resultant distribution interpolates between exponential at the low end and power law at the high end, in agreement with the empirical data for USA. We show that the increase of income inequality in USA originates primarily from the increase of the income fraction going to the upper tail, which now exceeds 20% of the total income. Analyzing the data from the World Resources Institute, we find that the distribution of energy consumption per capita around the world can be approximately described by the exponential function. Comparing the data for 1990, 2000, and 2005, we discuss the effect of globalization on the inequality of energy consumption.

Suggested Citation

  • Anand Banerjee & Victor M. Yakovenko, 2009. "Universal patterns of inequality," Papers 0912.4898, arXiv.org, revised Apr 2010.
    • Handle: RePEc:arx:papers:0912.4898
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    References listed on IDEAS

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    3. Fiaschi, Davide & Marsili, Matteo, 2012. "Distribution of wealth and incomplete markets: Theory and empirical evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 243-267.
    4. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
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