Equality in Income and Sustainability in Economic Growth: Agent-Based Simulations on OECD Data

Sakaki Sakaki

doi:10.3390/su11205803

Abstract

In countries that have developed under the current market economy, inequalities in income distribution tend to increase with three different trends, i.e., high (United States, United Kingdom, Japan), low (North Europe countries), and medium Gini coefficient levels. On the other hand, the relationship between income distribution and social welfare is generally a difficult problem to solve in economics. So, this paper discusses the impact of income distribution on the macroeconomy, limiting the scope to consistency with long-term economic growth. We attempt to answer these economic policy issues by simulation using an agent-based model based on replicator dynamics. As a result of the simulation in this paper, in general, in countries with the high marginal propensity to consume, long-term growth can be maintained by inducing equality in income distribution. On the other hand, a mature country with a low marginal propensity to consume can sustain not so high but stable growth despite increasing inequality in income distribution. According to simulation results based on OECD (Organisation for Economic Co-operation and Development) data, in the former UK, US, and Japan, the lower the Gini coefficient is, the higher the growth potential is, while in the latter Norway and Luxembourg, relatively stable growth is maintained even if the Gini coefficient increases.

Highlights

This chapter reviews theoretical studies on economic growth theory and empirical and practical studies on fiscal issues related to income distribution policies, from among a wealth of studies on macroeconomics
In countries that have developed under the current market economy, while with low economic growth, inequalities in income distribution tend to increase with three different trends, i.e., high (US, UK, Japan), low (North Europe countries), and medium Gini coefficient levels (Figure 1)
The mechanism involved in sustainable technological innovation, which constitutes the model in this paper, is a combination of two components: One is the implementation of the “genesis process” of technology in the “fluctuations in productivity” defined below, and the other is the implementation of the “diffusion process” of technology in the “replicator dynamics”

Summary

Introduction

This chapter reviews theoretical studies on economic growth theory and empirical and practical studies on fiscal issues related to income distribution policies, from among a wealth of studies on macroeconomics. Concerning the methodology on model construction and data analysis of agent-based simulation, this paper reviews various literature mainly related to socioeconomic problems from the enormous research results in the same field developed since the 1980s. This chapter begins with an overview of both global trends and country-specific trends in income disparities at the nation-state levels, together with an overview of trends at the industrial and corporate levels in Japan related to income disparities (Section 1.1). We will review existing studies on economic growth and income distribution (Section 1.2) from the viewpoint of economics and existing studies on agent-based models (Section 1.3) from the viewpoint of methodology, position the simulation model adopted in this paper in the genealogy of these existing studies, and examine its validity. Global Trends and Country-Specific Characteristics of Growing Income Inequality

Methods

Results

Conclusion