Wealth distribution under Yard–Sale exchange with proportional taxes

Bustos-Guajardo, R.; Moukarzel, Cristian F.

doi:10.1142/s0129183116500947

Cited by 9 publications

(6 citation statements)

References 14 publications

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“…Universal redistribution is the simplest case, where the total amount collected as taxes is equally distributed among all agents, irrespectively of their wealth. Similar taxation mechanism have already been proposed [13,26], but assuming that β values are very close to 1, and in the small transaction limit approximation. Despite this difference, our results are qualitatively analogous.…”

Section: A Universal Redistributionmentioning

confidence: 75%

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Inequality, a scourge of the XXI century

Iglesias,

Cardoso,

Gonçalves

2020

Preprint

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Social and economic inequality is a plague of the XXI Century. It is continuously widening, as the wealth of a relatively small group increases and, therefore, the rest of the world shares a shrinking fraction of resources. As an example, in 2016, the wealthiest 1% of US citizens possessed 40% of the nation's wealth, while in 2007 they had less than 35% [1] -considering the world's population, the richest 1% have today 50% of the total wealth. This situation has been predicted and denounced by economists and econophysicists. The latter ones have widely used models of market dynamics which consider that wealth distribution is the result of wealth exchanges among economic agents. A simple analogy relates the wealth in a society with the kinetic energy of the molecules in a gas, and the trade between agents to the energy exchange between the molecules during collisions. However, while in physical systems, thanks to the equipartition of energy, the gas eventually arrives at an equilibrium state, in many exchange models the economic system never equilibrates. Instead, it moves toward a "condensed" state, where one or a few agents concentrate all the wealth of the society and the rest of agents shares zero or a very small fraction of the total wealth. According to Piketty [2], many American countries, but also some European ones, are following this path. Here we discuss two ways of avoiding the "condensed" state. On one hand, we consider a regulatory policy that favors the poorest agent in the exchanges, thus increasing the probability that the wealth goes from the richest to the poorest agent. On the other hand, we study a tax system and its effects on wealth distribution. We compare the redistribution processes and conclude that complete control of the inequalities can be attained with simple regulations or interventions.

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Section: A Universal Redistributionmentioning

confidence: 75%

“…or introducing a taxation mechanism [13,26], where periodically all agents pay taxes and the amount collected is then in someway divided among the agents. Here, we study and generalize these two approaches.…”

Section: Introductionmentioning

confidence: 99%

Inequality, a scourge of the XXI century

Iglesias,

Cardoso,

Gonçalves

2020

Preprint

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“…Definition 2: If the dynamics of f (x, t) is driven by binary exchanges, then we can represent this dynamics with the following Master Equation [2,3,5,19,20] ∂f…”

Section: Master Equationmentioning

confidence: 99%

Wealth concentration in systems with unbiased binary exchanges

Cardoso,

Gonçalves,

Iglesias

2020

Preprint

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Aiming to describe the wealth distribution evolution, several models consider an ensemble of interacting economic agents that exchange wealth in binary fashion. Intriguingly, models that consider an unbiased market, that gives to each agent the same chances to win in the game, are always out of equilibrium until the perfect inequality of the final state is attained. Here we present a rigorous analytical demonstration that any system driven by unbiased binary exchanges are doomed to drive the system to perfect inequality and zero mobility.

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“…Different modifications have been introduced in the Yard-Sale model to overcome condensation. For example, increasing the probability of favoring the poorest agent in a transaction [19,20] or introducing a taxation mechanism [13,21,22], wherein all agents periodically contribute taxes, and the collected amount is subsequently distributed among them. This approach closely resembles real-world political systems adopted by various countries.…”

Section: Introductionmentioning

confidence: 99%

Taxes, Inequality, and Equal Opportunities

Iglesias,

Cardoso,

Gonçalves

2023

Entropy

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Extreme inequality represents a grave challenge for impoverished individuals and poses a threat to economic growth and stability. Despite the fulfillment of affirmative action measures aimed at promoting equal opportunities, they often prove inadequate in effectively reducing inequality. Mathematical models and simulations have demonstrated that even when equal opportunities are present, wealth tends to concentrate in the hands of a privileged few, leaving the majority of the population in dire poverty. This phenomenon, known as condensation, has been shown to be an inevitable outcome in economic models that rely on fair exchange. In light of the escalating levels of inequality in the 21st century and the significant state intervention necessitated by the recent COVID-19 pandemic, an increasing number of scholars are abandoning neo-liberal ideologies. Instead, they propose a more robust role for the state in the economy, utilizing mechanisms such as taxation, regulation, and universal allocations. This paper begins with the assumption that state intervention is essential to effectively reduce inequality and to revitalize the economy. Subsequently, it conducts a comparative analysis of various taxation and redistribution mechanisms, with a particular emphasis on their impact on inequality indices, including the Gini coefficient. Specifically, it compares the effects of fortune and consumption-based taxation, as well as universal redistribution mechanisms or targeted redistribution mechanisms aimed at assisting the most economically disadvantaged individuals. The results suggest that fortune taxation are more effective than consumption-based taxation to reduce inequality.

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Wealth distribution under Yard–Sale exchange with proportional taxes

Cited by 9 publications

References 14 publications

Inequality, a scourge of the XXI century

Inequality, a scourge of the XXI century

Wealth concentration in systems with unbiased binary exchanges

Taxes, Inequality, and Equal Opportunities

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