Microscopic Models for Welfare Measures Addressing a Reduction of Economic Inequality

Maria Letizia Bertotti and Giovanni Modanese

Papers from arXiv.org

Abstract: We formulate a flexible micro-to-macro kinetic model which is able to explain the emergence of income profiles out of a whole of individual economic interactions. The model is expressed by a system of several nonlinear differential equations which involve parameters defined by probabilities. Society is described as an ensemble of individuals divided into income classes; the individuals exchange money through binary and ternary interactions, leaving the total wealth unchanged. The ternary interactions represent taxation and redistribution effects. Dynamics is investigated through computational simulations, the focus being on the effects that different fiscal policies and differently weighted welfare policies have on the long-run income distributions. The model provides a tool which may contribute to the identification of the most effective actions towards a reduction of economic inequality. We find for instance that, under certain hypotheses, the Gini index is more affected by a policy of reduction of the welfare and subsidies for the rich classes than by an increase of the upper tax rate. Such a policy also has the effect of slightly increasing the total tax revenue.

Date: 2014-05, Revised 2014-09
New Economics Papers: this item is included in nep-cmp and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Complexity 21 (2016) 89-98

Downloads: (external link)
http://arxiv.org/pdf/1407.3749 Latest version (application/pdf)

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:arx:papers:1407.3749

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().