An out-of-equilibrium model of the distributions of wealth

Nicola Scafetta, Sergio Picozzi and Bruce West

Quantitative Finance, 2004, vol. 4, issue 3, 353-364

Abstract: The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms: trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may be fitted by a non-monotonic function with an exponential-like tail such as a gamma distribution, and the high wealth range, that is well fitted by a Pareto or inverse power-law function. We demonstrate that an appropriate trade-investment model, depending on three adjustable parameters associated with the total wealth of a society, a social differentiation among agents, and economic volatility referred to as investment, can successfully reproduce the distribution of empirical wealth data in the low, medium and high ranges. Finally, we provide an economic interpretation of the mechanisms in the model and, in particular, we discuss the difference between classical and neoclassical theories regarding the concepts of value and price. We consider the importance that out-of-equilibrium trade transactions, where the prices differ from values, have in real economic societies.

Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1088/1469-7688/4/3/010 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:4:y:2004:i:3:p:353-364

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1088/1469-7688/4/3/010

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().