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Exploiting the flexibility of a family of models for taxation and redistribution

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  • Maria Letizia Bertotti
  • Giovanni Modanese

Abstract

We discuss a family of models expressed by nonlinear differential equation systems describing closed market societies in the presence of taxation and redistribution. We focus in particular on three example models obtained in correspondence to different parameter choices. We analyse the influence of the various choices on the long time shape of the income distribution. Several simulations suggest that behavioral heterogeneity among the individuals plays a definite role in the formation of fat tails of the asymptotic stationary distributions. This is in agreement with results found with different approaches and techniques. We also show that an excellent fit for the computational outputs of our models is provided by the k-generalized distribution introduced by G. Kaniadakis (Physica A 296 (2001) 405-425).

Suggested Citation

  • Maria Letizia Bertotti & Giovanni Modanese, 2012. "Exploiting the flexibility of a family of models for taxation and redistribution," Papers 1207.6081, arXiv.org, revised Mar 2014.
  • Handle: RePEc:arx:papers:1207.6081
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    References listed on IDEAS

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    3. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    4. Hua He & William P. Keirstead & Joachim Rebholz, 1998. "Double Lookbacks," Mathematical Finance, Wiley Blackwell, vol. 8(3), pages 201-228.
    5. Bianca Hilberink & L.C.G. Rogers, 2002. "Optimal capital structure and endogenous default," Finance and Stochastics, Springer, vol. 6(2), pages 237-263.
    6. Li Chen & Damir Filipovic, 2003. "Pricing Credit Default Swaps Under Default Correlations and Counterparty Risk," Finance 0303009, EconWPA.
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    Cited by:

    1. Maria Letizia Bertotti & Giovanni Modanese, 2014. "Micro to macro models for income distribution in the absence and in the presence of tax evasion," Papers 1403.0015, arXiv.org.

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