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Towards a stochastic model with heterogeneous agents and class division

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  • Russo, Alberto

Abstract

We present a simple stochastic model in which heterogeneous agents accumulate wealth belonging to the capitalist or the working class, with profits generated by a stochastic multiplicative process and wages by an additive one. Class selection is based on a random process depending on wealth distribution and the profit rate. In general, playing the role of capitalist rises the probability of accumulating more and more wealth that, in turn, increases the probability to play again the role of the capitalist in following periods. This may give rise to an amplification mechanism leading to a persistent division in social classes. A scenario analysis is performed to explore the sensitivity of results to alternative assumptions on the propensity to consume/save and the fraction of wealth invested by capitalists in the risky process.

Suggested Citation

  • Russo, Alberto, 2011. "Towards a stochastic model with heterogeneous agents and class division," MPRA Paper 31733, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:31733
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    File URL: https://mpra.ub.uni-muenchen.de/31733/1/MPRA_paper_31733.pdf
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    References listed on IDEAS

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    1. Oded, Galor, 2011. "Inequality, Human Capital Formation, and the Process of Development," Handbook of the Economics of Education, Elsevier.
    2. Makoto Nirei & Wataru Souma, 2007. "A Two Factor Model Of Income Distribution Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(3), pages 440-459, September.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How not to think about class struggles
      by Economic Logician in Economic Logic on 2011-07-25 19:52:00

    More about this item

    Keywords

    wealth distribution; social classes; capitalist accumulation.;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • P10 - Economic Systems - - Capitalist Systems - - - General

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