Effects of network topology on wealth distributions

Abstract

We focus on the problem of how the wealth is distributed among the units of a networked economic system. We first review the empirical results documenting that in many economies the wealth distribution is described by a combination of the log-normal and power-law behaviours. We then focus on the Bouchaud–Mézard model of wealth exchange, describing an economy of interacting agents connected through an exchange network. We report analytical and numerical results showing that the system self-organizes towards a stationary state whose associated wealth distribution depends crucially on the underlying interaction network. In particular, we show that if the network displays a homogeneous density of links, the wealth distribution displays either the log-normal or the power-law form. This means that the first-order topological properties alone (such as the scale-free property) are not enough to explain the emergence of the empirically observed mixed form of the wealth distribution. In order to reproduce this nontrivial pattern, the network has to be heterogeneously divided into regions with a variable density of links. We show new results detailing how this effect is related to the higher-order correlation properties of the underlying network. In particular, we analyse assortativity by degree and the pairwise wealth correlations, and discuss the effects that these properties have on each other.