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Title: An agent-based model of the observed distribution of wealth in the United States

Pareto cautiously asserted that the wealth and income distributions which bear his name are universal, basing his argument on observations of this distribution in many different types of economies. In this paper, we present an agent based model (and a scalable approximation of it) in a closely related spirit. The central feature of this model is that wealth enables an individual to secure more wealth. Specifically, the important and novel feature of this model is its ability to simultaneously produce both the Pareto distribution observed in empirical data for the top 10% of the population and the exponential distribution observed for the lower 90%. We show that the model produces these distributions of wealth when initialized with an equitable distribution. Then, using historical data, we initialize the model with US wealth shares in 1988 and show that the model tracks wealth share changes from 1988 to 2012. Simulations to 2088 project that the top 0.01% of the population will possess more than 70% of the total wealth in the economy.
Authors:
 [1] ; ORCiD logo [2] ;  [2]
  1. Georgia Inst. of Technology, Atlanta, GA (United States)
  2. Oak Ridge National Lab. (ORNL), Oak Ridge, TN (United States)
Publication Date:
Grant/Contract Number:
AC05-00OR22725
Type:
Accepted Manuscript
Journal Name:
Journal of Economic Interaction and Coordination
Additional Journal Information:
Journal Volume: 13; Journal Issue: 3; Journal ID: ISSN 1860-711X
Publisher:
Springer Nature
Research Org:
Oak Ridge National Lab. (ORNL), Oak Ridge, TN (United States)
Sponsoring Org:
USDOE; ORNL Laboratory Directed Research and Development (LDRD) Program
Country of Publication:
United States
Language:
English
Subject:
97 MATHEMATICS AND COMPUTING; Pareto; Boltzmann–Gibbs; wealth; income; inequality; agent-based model
OSTI Identifier:
1474734

Vallejos, Hunter A., Nutaro, James J., and Perumalla, Kalyan S.. An agent-based model of the observed distribution of wealth in the United States. United States: N. p., Web. doi:10.1007/s11403-017-0200-9.
Vallejos, Hunter A., Nutaro, James J., & Perumalla, Kalyan S.. An agent-based model of the observed distribution of wealth in the United States. United States. doi:10.1007/s11403-017-0200-9.
Vallejos, Hunter A., Nutaro, James J., and Perumalla, Kalyan S.. 2017. "An agent-based model of the observed distribution of wealth in the United States". United States. doi:10.1007/s11403-017-0200-9. https://www.osti.gov/servlets/purl/1474734.
@article{osti_1474734,
title = {An agent-based model of the observed distribution of wealth in the United States},
author = {Vallejos, Hunter A. and Nutaro, James J. and Perumalla, Kalyan S.},
abstractNote = {Pareto cautiously asserted that the wealth and income distributions which bear his name are universal, basing his argument on observations of this distribution in many different types of economies. In this paper, we present an agent based model (and a scalable approximation of it) in a closely related spirit. The central feature of this model is that wealth enables an individual to secure more wealth. Specifically, the important and novel feature of this model is its ability to simultaneously produce both the Pareto distribution observed in empirical data for the top 10% of the population and the exponential distribution observed for the lower 90%. We show that the model produces these distributions of wealth when initialized with an equitable distribution. Then, using historical data, we initialize the model with US wealth shares in 1988 and show that the model tracks wealth share changes from 1988 to 2012. Simulations to 2088 project that the top 0.01% of the population will possess more than 70% of the total wealth in the economy.},
doi = {10.1007/s11403-017-0200-9},
journal = {Journal of Economic Interaction and Coordination},
number = 3,
volume = 13,
place = {United States},
year = {2017},
month = {8}
}