Fokker–Planck description of wealth dynamics and the origin of Pareto's law

Bruce Boghosian ()
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Bruce Boghosian: Department of Mathematics, Bromfield-Pearson Hall, Tufts University, Medford, Massachusetts 02155, USA

International Journal of Modern Physics C (IJMPC), 2014, vol. 25, issue 12, 1-8

Abstract: The so-called "Yard-Sale Model" of wealth distribution posits that wealth is transferred between economic agents as a result of transactions whose size is proportional to the wealth of the less wealthy agent. In recent work [B. M. Boghosian,Phys. Rev. E89, 042804 (2014)], it was shown that this results in a Fokker–Planck equation governing the distribution of wealth. With the addition of a mechanism for wealth redistribution, it was further shown that this model results in stationary wealth distributions that are very similar in form to Pareto's well-known law. In this paper, a much simpler derivation of that Fokker–Planck equation is presented.

Keywords: Pareto law; econophysics; wealth distribution; Fokker–Planck equation; 89.65.Gh (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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DOI: 10.1142/S0129183114410083

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