Berlin 2015 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 22: Economic Models

SOE 22.3: Talk

Thursday, March 19, 2015, 15:30–15:45, MA 001

Modeling the dynamics of wealth inequality and its possible control — •Yonatan Berman, Yoash Shapira, and Eshel Ben-Jacob — Tel-Aviv University, Tel-Aviv, Israel

In the past few decades, wealth inequality is rapidly increasing in western economies, thus imposing social and economic instabilities. One of the major challenges in studying the mechanisms that govern wealth inequality is the need to bridge between the individual and the population levels. In this talk we will present a new modeling approach for the dynamics of wealth inequality using stochastic iterated maps. By incorporating various economic parameters and their historical values, we were able to accurately capture the historical dynamics of wealth inequality in the United States during the 20th century.

We show that the capital income to national income ratio and the personal savings fraction are the most critical factors in determining inequality. The sensitivity of wealth inequality to the economic mobility is found as relatively low at the current mobility state.

Most notably, it is found that the most probable and important contributor to the recent surge in inequality is the major decrease in personal savings since the 1980's. Following these results we use the model to predict a further increase in wealth inequality in the near future. However, given a substantial increase in private savings or a major decrease in capital income to national income ratio, this scenario might be prevented.