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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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    References listed on IDEAS

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    1. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 23(2), pages 83-100.
    2. Neri Salvadori (ed.), 2006. "Economic Growth and Distribution," Books, Edward Elgar Publishing, number 3798, June.
    3. Oded, Galor, 2011. "Inequality, Human Capital Formation, and the Process of Development," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 441-493, Elsevier.
    4. 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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    1. How not to think about class struggles
      by Economic Logician in Economic Logic on 2011-07-25 19:52:00

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    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 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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