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Wealth inequality and social mobility: A simulation-based modelling approach

Yang, Xiaoliang and Zhou, Peng ORCID: 2022. Wealth inequality and social mobility: A simulation-based modelling approach. Journal of Economic Behavior and Organization 196 , pp. 307-329. 10.1016/j.jebo.2022.02.012

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We design a series of simulation-based thought experiments to deductively evaluate the causal effects of various factors on wealth inequality (the distribution) and social mobility (dynamics of the distribution). We find that uncertainty per se can lead to a “natural” degree of inequality and returns-related factors contribute more than earnings-related factors. Based on these identified factors, we construct an empirical, hybrid agent-based model to match the observed wealth inequality measures of the G7 countries and China. The estimated model can generate a power-law wealth distribution for the rich and a positively sloped intra-generational Great Gatsby curve. We also demonstrate how this hybrid model can be extended to a wide range of questions such as redistributive effects of tax and finance.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Additional Information: This is an open access article under the CC BY license (
Publisher: Elsevier
ISSN: 0167-2681
Date of First Compliant Deposit: 25 February 2022
Date of Acceptance: 10 February 2022
Last Modified: 03 May 2023 10:14

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