The fractal nature of inequality in a fast growing world
Series
Working Papers
Type
working paper
Date Issued
2009
Author(s)
Abstract
In this paper we investigate wealth inequality/polarization properties related to the support of the limit distribution of wealth in innovative economies characterized by uninsurable individual risk. We work out two simple successive generation examples, one with stochastic human capital accumulation and one with R&D, and 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 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 become unequal and polarized. We also show that a redistribution scheme financed by proportional taxation does not help cure society's inequality/polarization - on the contrary, it might increase it - whereas random taxation may well succeed in filling the gap by giving rise to an artificial middle class, but it hardly makes such class sizeable enough. Finally, we investigate how disconnection, a typical feature of Cantor-like sets, is related to inequality in the long run.
payoff of the successful individuals is high enough, and in which social mobility is strong, societies tend to become unequal and polarized. We also show that a redistribution scheme financed by proportional taxation does not help cure society's inequality/polarization - on the contrary, it might increase it - whereas random taxation may well succeed in filling the gap by giving rise to an artificial middle class, but it hardly makes such class sizeable enough. Finally, we investigate how disconnection, a typical feature of Cantor-like sets, is related to inequality in the long run.
Language
English
Keywords
Wealth Inequality
Growth
Fractal
Polarization
Pulverization
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
No
Publisher
Business School - Economics, University of Glasgow
Number
2009_30
Subject(s)
Eprints ID
222118
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2009_30 WP Glassgow.pdf
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Format
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