The Dynamics of Wealth Inequality and the Effect of Income Distribution

Berman, Yonatan; Ben‐Jacob, Eshel; Shapira, Yoash

doi:10.1371/journal.pone.0154196

Cited by 46 publications

(48 citation statements)

References 45 publications

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“…(25), how the value of σ 1 required for the initial decrease of CV(t) is dependent onβ. These results echo the findings of Piketty [1] and others [3,10,22], showing that when the wealth-saved-income ratio is very high, and particularly when personal savings rates are low, wealth inequality is likely to increase, and vice versa. Since income is more equally distributed than wealth, a high savings rate strongly couples wealth to income, and therefore may lead to a low wealth-income ratio and to the reduction of wealth inequality, as explained in [4].…”

Section: -P4supporting

confidence: 88%

“…The model substantially differs from previous models of wealth dynamics, in particular refs. [3,10]. In this paper we present a much generalized model with two substantial improvements:…”

mentioning

confidence: 99%

“…In previous models, such as those presented in refs. [3,10], income was taken as an external contribution to wealth and the dynamics were deterministic.…”

mentioning

confidence: 99%

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A Fokker-Planck model for wealth inequality dynamics

Berman

Shapira

Schwartz

2017

EPL

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Studying the mechanisms that govern the dynamics of the wealth distribution is essential for understanding the recent trend of growing wealth inequality. A particularly important explanation is Piketty's argument, giving credit to the seminal events of the first half of the 20th century for the relatively egalitarian second half of this century. Piketty suggested that these dramatic events were merely a perturbation imposed on the economy affecting the wealth structure, while in general, wealth inequality tends to increase regularly. We present a simple stochastic model for wealth and income based on coupled geometric Brownian motions and derive a Fokker-Planck equation from which the joint wealth-income distribution and its moments can be extracted. We then analyze the dynamics of these moments and hence of the inequality. Our analysis largely supports Piketty's argument regarding the irregularity of the 20th century, that wealth inequality inevitably tends to increase. We find, however, that even if wealth inequality will eventually go up, under plausible conditions, it can go down for periods of up to several decades.

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Section: -P4supporting

confidence: 88%

“…The model substantially differs from previous models of wealth dynamics, in particular refs. [3,10]. In this paper we present a much generalized model with two substantial improvements:…”

mentioning

confidence: 99%

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A Fokker-Planck model for wealth inequality dynamics

Berman

Shapira

Schwartz

2017

EPL

Self Cite

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“…Similar analyses documenting the recent trends in economic inequality were provided by Piketty and Saez [6], Piketty and Zucman [28], Ostry, Berg, and Tsangarides [4], and the IMF [1]. Macroeconomic approaches to economic inequality were developed, among others, by Cagetti and De Nardi [29], Benhabib, Bisin, and Zhu [30], and Berman, Ben-Jacob and Shapira [31].…”

Section: Economic Inequality and Labor Sharementioning

confidence: 72%

Public Capital and the Labor Income Share

Bom

Goti

2018

Sustainability

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The decline of the labor share of income over the last few decades has been documented for many developed economies. A declining labor share is associated with rising income inequality, which raises obvious economic and social concerns. Although several explanations for this fact have been provided in the literature, they usually rely on elastic substitution between private capital and labor, which is generally not supported by the empirical literature. We argue in this paper that the fall in the labor share is potentially associated with the decline in public investment ratios, which have also been observed in most developed economies in the last few decades. We use a calibrated small-scale macroeconomic model to show how a negative public investment shock can have a sizeable negative effect on the labor share. Two assumptions are key in this result: that public capital directly augments private capital in production and that the elasticity of substitution between private capital and labor is smaller than one. We argue that both assumptions are plausible in practice. Our results suggest that, to promote long-run sustainable and inclusive growth, governments should increase the fraction of output devoted to public investment.

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“…(3), this local efficiency quantifies the benefit provided by the therapeutic to each specific location on a scale ranging from zero (no benefit) to unity (optimal). This allows us to evaluate the level of benefit inequality between all nodes through the Gini coefficient 35,36…”

Section: Distribution Equalitymentioning

confidence: 99%

Digital therapeutics for distributed response to global pandemics

Hacohen¹,

Cohen

Efroni

et al. 2018

Preprint

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Despite advances in the development of drugs and vaccines, the spread of infectious diseases remains an imminent threat to our global health, in extreme cases potentially having detrimental consequences. At present our response to this threat is based on physically distributing therapeutic material, which utilizes the same transportation networks that support the spread of the infectious agent itself. Such competition is at risk of failure in the face of a rapidly spreading pathogen, especially given the inevitable delay from the initial outbreak to the development and execution of our response. Moreover, based on our existing transportation networks, we show that such physical distribution is intrinsically inefficient, leading to an uneven concentration of the therapeutic within a small fraction of destinations, while leaving the majority of the population deprived. This suggests that outrunning a virulent epidemic can only be achieved if we develop a mitigation strategy that bypasses the existing distribution networks of biological and chemical material. Here we propose such a response, utilizing digitizable therapeutics, which can be distributed as digital sequence files and synthesized on location, exposing an extremely efficient mitigation scheme that systematically outperforms physical distribution. Our proposed strategy, based for example on nucleic acid therapeutics, is plausibly the only viable mitigation plan, based on current technology, that can face a violently spreading pathogen. Complementing the current paradigm, which ranks drugs based on efficacy, our analysis demonstrates the importance of balancing efficacy with distributability, finding that in some cases the latter plays the dominant role in the overall mitigation efficiency.When studied from the angle of its worst-case scenario, surviving a highly infectious pandemic depends on a competition between the infectious pathogen and the therapeutic technology, each racing to reach the majority of the population first. This competition confronts us with several challenges: (i) the inevitable response time R required for us to instigate a mitigation plan places the pathogen at a potentially significant spreading advantage; (ii) while the pathogen reproduces as it spreads 1-3 , a therapy must be manufactured and shipped from one or few sources, whose production and distribution capacity may be limited 4-12 ; (iii) the dissemination of antibiotics or vaccines can be hindered by various external factors, such as geopolitical and socio-economical constraints [13][14][15][16] , which have little effect on the propagation of bacteria and viruses. But even if such factors are eliminated, e.g., assuming that an effective cure already exists, stockpiled in sufficient quantities and benefits from worldwide cooperation in its distribution, it would still have to outrun the pathogen, competing along the same routes of dissemination as the epidemic, i.e. the international transportation networks 17-23 . For a rapidly progressing epidemic, such competition may f...

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The Dynamics of Wealth Inequality and the Effect of Income Distribution

Cited by 46 publications

References 45 publications

A Fokker-Planck model for wealth inequality dynamics

A Fokker-Planck model for wealth inequality dynamics

Public Capital and the Labor Income Share

Digital therapeutics for distributed response to global pandemics

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