Why Money Trickles Up - Wealth & Income Distributions

Details Why Money Trickles Up - Wealth & Income Distributions Why Money Trickles Up - Wealth & Income Distributions

2011-05-11

arxiv.org/abs/1105.2122v2

Economy

Quantitative Finance

General Finance

45 pages of text, 36 figures

Scientific paper

This paper combines ideas from classical economics and modern finance with the general Lotka-Volterra models of Levy & Solomon to provide straightforward explanations of wealth and income distributions. Using a simple and realistic economic formulation, the distributions of both wealth and income are fully explained. Both the power tail and the log-normal like body are fully captured. It is of note that the full distribution, including the power law tail, is created via the use of absolutely identical agents. It is further demonstrated that a simple scheme of compulsory saving could eliminate poverty at little cost to the taxpayer.

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