Quantitative description of realistic wealth distributions by kinetic trading models

Phys Rev E Stat Nonlin Soft Matter Phys. 2008 Oct;78(4 Pt 2):047103. doi: 10.1103/PhysRevE.78.047103. Epub 2008 Oct 24.

Abstract

Data on wealth distributions in trading markets show a power law behavior x(-)(1+alpha) at the high end, where, in general, alpha is greater than 1 (Pareto's law). Models based on kinetic theory, where a set of interacting agents trade money, yield power law tails if agents are assigned a saving propensity. In this paper we are solving the inverse problem, that is, in finding the saving propensity distribution which yields a given wealth distribution for all wealth ranges. This is done explicitly for two recently published and comprehensive wealth datasets.

Publication types

  • Research Support, Non-U.S. Gov't