Wealth Polarization and Pulverization in Fractal Societies
Series
ICER Working Papers - Applied Mathematics Series
Type
working paper
Date Issued
2002
Author(s)
Abstract
In this paper we study the geometrical properties of the support of the limit distributions
of income/wealth in economies with uninsurable individual risk, and how they are affected by technology and preference parameters and by policy variables. We work out two simple successive generation models with stochastic human capital accumulation and with R&D and we prove that intense technological progress makes the support of the wealth distribution converge to a fractal Cantor-like set. Such limit distribution implies
the disappearance of the middle class, with a "gap" between two polarized wealth clusters that widens as the growth rate becomes higher. Hence, we claim that in a highly meritocratic world in which the payoff of the successful individuals is high enough, and
in which social mobility is strong, societies tend to look highly "fractalized". We also
show that a redistribution scheme financed by proportional taxation does not help cure
society's disconnection/polarization; on the contrary, it might increase it. Finally we show that these results are not confined to our analytically worked out examples but are easily extended to a widely used class of macroeconomic and growth models.
of income/wealth in economies with uninsurable individual risk, and how they are affected by technology and preference parameters and by policy variables. We work out two simple successive generation models with stochastic human capital accumulation and with R&D and we prove that intense technological progress makes the support of the wealth distribution converge to a fractal Cantor-like set. Such limit distribution implies
the disappearance of the middle class, with a "gap" between two polarized wealth clusters that widens as the growth rate becomes higher. Hence, we claim that in a highly meritocratic world in which the payoff of the successful individuals is high enough, and
in which social mobility is strong, societies tend to look highly "fractalized". We also
show that a redistribution scheme financed by proportional taxation does not help cure
society's disconnection/polarization; on the contrary, it might increase it. Finally we show that these results are not confined to our analytically worked out examples but are easily extended to a widely used class of macroeconomic and growth models.
Language
English
Keywords
Inequality and Growth
Education
Technological Change
Wealth Polarization/Pulverization
Iterated Function System
Attractor
Fractal
Cantor Set
Invariant
Distribution.
Distribution.
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
No
Publisher
ICER - International Centre for Economic Research
Number
39-2002
Subject(s)
Eprints ID
222143
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