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Influence of saving propensity on the power-law tall of the wealth distribution

Patriarca, M; Chakraborti, A; Germano, G; (2006) Influence of saving propensity on the power-law tall of the wealth distribution. Physica A: Statistical Mechanics and its Applications , 369 (2) pp. 723-736. 10.1016/j.physa.2006.01.091. Green open access

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Abstract

Some general features of statistical multi-agent economic models are reviewed, with particular attention to the dependence of the equilibrium wealth distribution on the agents’ saving propensities. It is shown that in a finite system of agents with a continuous saving propensity distribution a power-law tail with Pareto exponent α=1 can appear also when agents do not have saving propensities distributed over the whole interval between zero and one. Rather, a power-law can be observed in a finite interval of wealth, whose lower and upper ends are shown to be determined by the lower and upper cutoffs, respectively, of the saving propensity distribution. It is pointed out that a cutoff of the power-law tail can arise also through a different mechanism, when the number of agents is small enough. Numerical simulations have been carried out by implementing a procedure for assigning saving propensities homogeneously, which results in a smoother wealth distributions and correspondingly wider power-law intervals than other procedures based on random algorithms.

Type: Article
Title: Influence of saving propensity on the power-law tall of the wealth distribution
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.physa.2006.01.091
Publisher version: http://dx.doi.org/10.1016/j.physa.2006.01.091
Language: English
Additional information: © 2006. This manuscript version is published under a Creative Commons Attribution Non-commercial Non-derivative 4.0 International licence (CC BY-NC-ND 4.0). This licence allows you to share, copy, distribute and transmit the work for personal and non-commercial use providing author and publisher attribution is clearly stated. Further details about CC BY licences are available at http://creativecommons.org/licenses/by/4.0.
Keywords: economics, econophysics, wealth distribution, power-laws, statistical mechanics
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science
URI: https://discovery.ucl.ac.uk/id/eprint/1407435
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