Inequality, Mobility and the Financial Accumulation Process: A Computational Economic Analysis
University of Yale SOM, Accounting Research Workshop, 24 April 2018 2nd International Workshop on “Financial Markets and Nonlinear Dynamics” (FMND), Paris, 4-5 June 2015 Econophysics Colloquium (EC 2015), Prague, 14 September 2015
Journal of Economic Interaction and Coordination (2019). DOI: 10.1007/s11403-019-00236-7
31 Pages Posted: 10 Jul 2015 Last revised: 14 Jan 2019
Date Written: January 11, 2019
Abstract
Our computational economic analysis investigates the relationship between inequality, mobility and the financial accumulation process. Extending the baseline model by Levy et al., we characterise the economic process through stylised return structures generating alternative evolutions of income and wealth through time. First, we explore the limited heuristic contribution of one and two factors models comprising one single stock (capital wealth) and one single flow factor (labour) as pure drivers of income and wealth generation and allocation over time. Second, we introduce heuristic modes of taxation in line with the baseline approach. Our computational economic analysis corroborates that the financial accumulation process featuring compound returns plays a significant role as source of inequality, while institutional arrangements including taxation play a significant role in framing and shaping the aggregate economic process that evolves over socioeconomic space and time.
Keywords: inequality, economic process, compound interest, simple interest, taxation, minimal institution, computational economics, econophysics
JEL Classification: C46, C63, D31, E02, E21, E27, D63, H22
Suggested Citation: Suggested Citation