A dynamic model of wealth segregation

Eugenio Vicario ()
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Eugenio Vicario: University of Florence

Journal of Economic Interaction and Coordination, 2025, vol. 20, issue 3, No 8, 747-773

Abstract: Abstract We propose a dynamic model where the real estate market generates wealth segregation within a town. The model develops on the Schelling’s checkerboard dynamics with one main difference: Agents are fully characterized by their wealth, which changes with the progress of the model dynamics. The driver of the segregation is a positive neighborhood externality such that households’ utility is increasing in the average wealth of the neighbors. The identification of a potential function enables prediction of the long-run limiting behavior of the dynamics: Wealth segregation is an endemic result, unless a perturbation at the individual level is introduced. Public policies that mimic the perturbation can reduce wealth segregation.

Keywords: Wealth segregation; Agent-based simulation; Potential game; Local interactions (search for similar items in EconPapers)
JEL-codes: C73 D13 D31 R2 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11403-024-00416-0

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