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Inequality reversal: effects of the savings propensity and correlated returns

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  • Anindya S. Chakrabarti
  • Bikas K. Chakrabarti

Abstract

In the last decade, a large body of literature has been developed to explain the universal features of inequality in terms of income and wealth. By now, it is established that the distributions of income and wealth in various economies show a number of statistical regularities. There are several models to explain such static features of inequality in an unifying framework and the kinetic exchange models, in particular, provide one such framework. Here we focus on the dynamic features of inequality. In the process of development and growth, inequality in an economy in terms of income and wealth follows a particular pattern of rising in the initial stage followed by an eventual fall. This inverted U-shaped curve is known as the Kuznets Curve. We examine the possibilities of such behavior of an economy in the context of a generalized kinetic exchange model. It is shown that under some specific conditions, our model economy indeed shows inequality reversal.

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  • Anindya S. Chakrabarti & Bikas K. Chakrabarti, 2010. "Inequality reversal: effects of the savings propensity and correlated returns," Papers 1005.3518, arXiv.org.
    • Handle: RePEc:arx:papers:1005.3518
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    References listed on IDEAS

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    1. Repetowicz, Przemysław & Hutzler, Stefan & Richmond, Peter, 2005. "Dynamics of money and income distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 356(2), pages 641-654.
    2. Silver, Jonathan & Slud, Eric & Takamoto, Keiji, 2002. "Statistical Equilibrium Wealth Distributions in an Exchange Economy with Stochastic Preferences," Journal of Economic Theory, Elsevier, vol. 106(2), pages 417-435, October.
    3. Anirban Chakraborti & Bikas K. Chakrabarti, 2000. "Statistical mechanics of money: How saving propensity affects its distribution," Papers cond-mat/0004256, arXiv.org, revised Jun 2000.
    4. Angle, John & Nielsen, Francois & Scalas, Enrico, 2009. "The Kuznets Curve and the Inequality Process," MPRA Paper 16058, University Library of Munich, Germany, revised 29 Jun 2009.
    5. 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;EDP Sciences, vol. 60(2), pages 135-149, November.
    6. Chakrabarti, Anindya S. & Chakrabarti, Bikas K., 2009. "Microeconomics of the ideal gas like market models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(19), pages 4151-4158.
    7. Arnab Chatterjee & Bikas K. Chakrabarti, 2007. "Kinetic Exchange Models for Income and Wealth Distributions," Papers 0709.1543, arXiv.org, revised Nov 2007.
    8. 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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    Cited by:

    1. Chatterjee, Arnab & Ghosh, Asim & Chakrabarti, Bikas K., 2017. "Socio-economic inequality: Relationship between Gini and Kolkata indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 466(C), pages 583-595.
    2. Chatterjee, Arnab & Chakrabarti, Anindya S. & Ghosh, Asim & Chakraborti, Anirban & Nandi, Tushar K., 2016. "Invariant features of spatial inequality in consumption: The case of India," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 442(C), pages 169-181.
    3. Ghosh, Asim & Chatterjee, Arnab & Inoue, Jun-ichi & Chakrabarti, Bikas K., 2016. "Inequality measures in kinetic exchange models of wealth distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 451(C), pages 465-474.
    4. Kiran Sharma & Subhradeep Das & Anirban Chakraborti, 2017. "Global Income Inequality and Savings: A Data Science Perspective," Papers 1801.00253, arXiv.org, revised Aug 2018.

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