Financial accumulation implies ever-increasing wealth inequality
Biondi, Yuri; Olla, Stefano (2020), Financial accumulation implies ever-increasing wealth inequality, Journal of Economic Interaction and Coordination, 15, p. 943–951. 10.1007/s11403-020-00281-7
TypeArticle accepté pour publication ou publié
Journal nameJournal of Economic Interaction and Coordination
MetadataShow full item record
Institut de Recherche Interdisciplinaire en Sciences Sociales [IRISSO]
CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Abstract (EN)Wealth inequality is an important matter for economic theory and policy. The recent rise in wealth inequality has been discussed in connection with the recent development of active global financial markets. The existing literature on wealth distribution links wealth inequality to a variety of drivers. Our approach develops a minimalist modelling strategy that combines three featuring mechanisms: active financial markets, individual wealth accumulation and compound interest structure. We provide mathematical proof that accumulated financial investment returns involve ever-increasing wealth concentration and inequality across individual investors most of the time. This cumulative effect over space and time depends on financial accumulation processes, including under efficient financial markets, which generate a fair investment game that individual investors repeatedly play through time.
Subjects / KeywordsInequality; Economic process; Compound return; Simple return; Minimal institution
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