Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1809.08681.html
   My bibliography  Save this paper

Financial accumulation implies ever-increasing wealth inequality

Author

Listed:
  • Yuri Biondi
  • Stefano Olla
Abstract
Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing literature on wealth distribution connects the origins of wealth inequality with a variety of drivers. Our approach develops a minimalist modelling strategy that combines three featuring mechanisms: active financial markets; individual wealth accumulation; and compound interest structure. We provide mathematical proof that accumulated financial investment returns involve ever-increasing wealth concentration and inequality across individual investors through time. This cumulative effect through space and time depends on the financial accumulation process and holds also under efficient financial markets, which generate some fair investment game that individual investors do repeatedly play through time.

Suggested Citation

  • Yuri Biondi & Stefano Olla, 2018. "Financial accumulation implies ever-increasing wealth inequality," Papers 1809.08681, arXiv.org, revised Nov 2019.
    • Handle: RePEc:arx:papers:1809.08681
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1809.08681
    File Function: Latest version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Moshe Levy & Haim Levy, 2003. "Investment Talent and the Pareto Wealth Distribution: Theoretical and Experimental Analysis," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 709-725, August.
    2. Thomas Piketty, 2013. "Le capital au XXIe siècle," Post-Print halshs-00979232, HAL.
    3. Yuri Biondi & Simone Righi, 2020. "Much ado about making money: the impact of disclosure, news and rumors on the formation of security market prices over time," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(2), pages 333-362, April.
    4. Yuri Biondi & Simone Righi, 2019. "Inequality, mobility and the financial accumulation process: a computational economic analysis," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(1), pages 93-119, March.
    5. Mr. Jonathan David Ostry & Mr. Andrew Berg & Mr. Charalambos G Tsangarides, 2014. "Redistribution, Inequality, and Growth," IMF Staff Discussion Notes 2014/002, International Monetary Fund.
    6. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2007. "Finance, inequality and the poor," Journal of Economic Growth, Springer, vol. 12(1), pages 27-49, March.
    7. Paul A. Samuelson, 1973. "Proof That Properly Discounted Present Values of Assets Vibrate Randomly," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 369-374, Autumn.
    8. Blume, Lawrence E. & Durlauf, Steven N., 2005. "The Economy As an Evolving Complex System III: Current Perspectives and Future Directions," OUP Catalogue, Oxford University Press, number 9780195162592.
    9. Giuseppe Bertola & Reto Foellmi & Josef Zweimüller, 2005. "Income Distribution in Macroeconomic Models," Economics Books, Princeton University Press, edition 1, number 8058.
    10. Yuri Biondi & Simone Righi, 2015. "Much ado about making money:The impact of disclosure, news and rumors over the formation of security market prices over time," Department of Economics 0075, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    11. Voinov, Alexey & Farley, Joshua, 2007. "Reconciling sustainability, systems theory and discounting," Ecological Economics, Elsevier, vol. 63(1), pages 104-113, June.
    12. Makoto Nirei & Wataru Souma, 2007. "A Two Factor Model Of Income Distribution Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(3), pages 440-459, September.
    13. Jonathan David Ostry & Andrew Berg & Charalambos G Tsangarides, 2014. "Redistribution, Inequality, and Growth," IMF Staff Discussion Notes 14/02, International Monetary Fund.
    14. Y. Biondi, 2011. "Cost of capital, discounting and relational contracting: endogenous optimal return and duration for joint investment projects," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4847-4864.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yuri Biondi & Simone Righi, 2019. "Inequality, mobility and the financial accumulation process: a computational economic analysis," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(1), pages 93-119, March.
    2. Francisco Cardoso, Ben-Hur & Gonçalves, Sebastián & Iglesias, José Roberto, 2023. "Why equal opportunities lead to maximum inequality? The wealth condensation paradox generally solved," Chaos, Solitons & Fractals, Elsevier, vol. 168(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yuri Biondi & Simone Righi, 2019. "Inequality, mobility and the financial accumulation process: a computational economic analysis," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(1), pages 93-119, March.
    2. Can Sever & Emekcan Yucel, 2021. "Electoral Cycles in Inequality Abstract:," Working Papers 2021/01, Bogazici University, Department of Economics.
    3. Thibault Darcillon, 2016. "Do Interactions between Finance and Labour Market Institutions Affect the Income Distribution?," LABOUR, CEIS, vol. 30(3), pages 235-257, September.
    4. Sirine MNIF, 2017. "The Impact of Inequality on Growth Driven by Technological Changes: a Panel of Developing Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(1), pages 127-140, March.
    5. Tendai Zawaira & Matthew Clance & Carolyn Chisadza & Rangan Gupta, 2021. "Financial Inclusion and Gender Inequality in sub-Saharan Africa," Working Papers 202167, University of Pretoria, Department of Economics.
    6. Chris Tsoukis & Jun-ichi Itaya, 2019. "Distributive justice and social conflict in an AK model," CESifo Working Paper Series 7601, CESifo.
    7. Emiliano Álvarez & Marcelo Álvez & Juan Gabriel Brida, 2020. "Impuesto progresivo al ingreso y crecimiento. Abordaje desde la complejidad," Documentos de trabajo 2020008, Banco Central del Uruguay.
    8. Jonathan D. Ostry & Andrew Berg & Siddharth Kothari, 2021. "Growth‐equity trade‐offs in structural reforms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(2), pages 209-237, May.
    9. Gravina, Antonio Francesco & Lanzafame, Matteo, 2021. "Finance, globalisation, technology and inequality: Do nonlinearities matter?," Economic Modelling, Elsevier, vol. 96(C), pages 96-110.
    10. Francesco Saraceno, 2014. "L'impact économique des fortes inégalités : problèmes et solutions," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(3), pages 187-200.
    11. Florence Jaumotte & Carolina Osorio Buitron, 2020. "Inequality: traditional drivers and the role of union power," Oxford Economic Papers, Oxford University Press, vol. 72(1), pages 25-58.
    12. Zare , Roohollah, 2019. "Globalization and Income Inequality: Does the Level of Financial Development Matter?," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 14(2), pages 159-175, April.
    13. Markus Brueckner & Daniel Lederman, 2018. "Inequality and economic growth: the role of initial income," Journal of Economic Growth, Springer, vol. 23(3), pages 341-366, September.
    14. Mohamed Ali Trabelsi & Salah Ahmed, 2021. "Economic Resilience in Developing Countries: The Role of Democracy in the Face of External Shocks," Working Papers 1499, Economic Research Forum, revised 20 Oct 2021.
    15. Ville-Veikko Pulkka, 2017. "A free lunch with robots – can a basic income stabilise the digital economy?," Transfer: European Review of Labour and Research, , vol. 23(3), pages 295-311, August.
    16. repec:spo:wpmain:info:hdl:2441/gmkj8k1vf8tpbdue5q2emsepp is not listed on IDEAS
    17. Stefan Bach, 2014. ""Reichensteuer"-Diskussion: Hintergrund und Perspektiven," DIW Roundup: Politik im Fokus 16, DIW Berlin, German Institute for Economic Research.
    18. Francesco Savoia & Ioannis Bournakis & Mona Said & Antonio Savoia, 2024. "Regional income inequality in Egypt: evolution and implications for Sustainable Development Goal 10," Oxford Development Studies, Taylor & Francis Journals, vol. 52(1), pages 17-33, January.
    19. Caruso Raul & Antonella Biscione, 2022. "Militarization and Income Inequality in European Countries (2000–2017)," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 28(3), pages 267-285, September.
    20. Pedro R. D. Bom & Aitor Goti, 2018. "Public Capital and the Labor Income Share," Sustainability, MDPI, vol. 10(11), pages 1-17, October.
    21. Mr. Raphael A Espinoza & Mrs. Esther Perez Ruiz, 2014. "Labor Tax Cuts and Employment: A General Equilibrium Approach for France," IMF Working Papers 2014/114, International Monetary Fund.

    More about this item

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1809.08681. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.