Wealth distribution models with regulations: Dynamics and equilibria

Abstract

Simple agent based exchange models are a commonplace in the study of wealth distribution in an artificial economy. Generally, in a system that is composed of many agents characterized by their wealth and risk-aversion factor, two agents are selected sequentially and randomly to exchange wealth, allowing its redistribution. Here we analyze how the effect of social protection policies, which favor agents of lower wealth during the exchange, influences the stability and some relevant economic indicators of the system. On the other hand, we study how periods of interruption of these policies produce, in the short and long term, changes in the system. In all cases, a steady state is reached, but with varying relaxation times. We conclude that regulations may improve economic mobility and reduce inequality. Moreover, our results indicate that the removal of social protection entails a high cost associated with the hysteresis of the distribution of wealth. Economic inequalities increase during the period without social protection and decrease when they are restored. But recovery to the initial equilibrium may take longer than it took to disturb it. In some extreme cases, inequality is irreversible.