The impact of randomness on the distribution of wealth: Some economic aspects of the Wright-Fisher diffusion process

Nicolas Bouleau () and Christophe Chorro ()
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Nicolas Bouleau: CIRED, Ecole des Ponts-ParisTech
Christophe Chorro: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: In this paper we consider some elementary and fair zero-sum games of chance to study the impact of random effects on the wealth distribution of N interacting players. Even if an exhaustive analytical study of such games between many players may be tricky, numerical experiments highlight interesting asymptotic properties, in particular, we underscore that randomness plays a key role in concentrating the wealth to the extreme with a single player. From a mathematical perspective, we interestingly recover for small and high-frequency transactions some diffusion limits extensively used in population genetics. Finally, the impact of small tax rates on the preceding dynamics is discussed for several regulation mechanisms. We show that taxation of income is not sufficient to overcome the externe concentration process contrary to a uniform taxation of capital that stabilizes the economy preventing agents to be ruined

Keywords: Wealth distribution; Fair zero-sum games; Wright-Fisher diffusions; Inequalities; Impact of modes of taxation (search for similar items in EconPapers)
JEL-codes: C32 C63 D31 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-03, Revised 2015-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:15024r

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