dorsal/arxiv
View SchemaA stochastic model of wealth distribution
| Authors | Indrani Bose, Subhasis Banerjee |
|---|---|
| Categories | |
| ArXiv ID | physics/0504137 |
| URL | https://arxiv.org/abs/physics/0504137 |
Abstract
We propose a stochastic model of evolution of wealth in a society of economic agents. In the model, an agent can be in two states: inactive and active. Transitions between the states occur at random time intervals. In the active state, the rate at which wealth increases is greater than that in the inactive state. In both the states, wealth diminishes at a rate proportional to the current wealth. The probability density function describing the wealth distribution in the steady state is found to have the form of a beta distribution. Wealth distributions for the poor, middle and the rich classes are obtained separately. In economic literature, beta distribution and its generalisations, namely, the generalised beta distribution functions have been proposed to describe the income distributions of different economic societies. Our stochastic model provides a simple basis for the appearance of beta-type distributions.
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"abstract": "We propose a stochastic model of evolution of wealth in a society of economic\nagents. In the model, an agent can be in two states: inactive and active.\nTransitions between the states occur at random time intervals. In the active\nstate, the rate at which wealth increases is greater than that in the inactive\nstate. In both the states, wealth diminishes at a rate proportional to the\ncurrent wealth. The probability density function describing the wealth\ndistribution in the steady state is found to have the form of a beta\ndistribution. Wealth distributions for the poor, middle and the rich classes\nare obtained separately. In economic literature, beta distribution and its\ngeneralisations, namely, the generalised beta distribution functions have been\nproposed to describe the income distributions of different economic societies.\nOur stochastic model provides a simple basis for the appearance of beta-type\ndistributions.",
"arxiv_id": "physics/0504137",
"authors": [
"Indrani Bose",
"Subhasis Banerjee"
],
"categories": [
"physics.soc-ph",
"cond-mat.stat-mech"
],
"title": "A stochastic model of wealth distribution",
"url": "https://arxiv.org/abs/physics/0504137"
},
"schema_id": "dorsal/arxiv",
"source": {
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