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The Dynamics of Wealth Inequality and the Effect of Income Distribution

The rapid increase of wealth inequality in the past few decades is one of the most disturbing social and economic issues of our time. Studying its origin and underlying mechanisms is essential for policy aiming to control and even reverse this trend. In that context, controlling the distribution of...

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Autores principales: Berman, Yonatan, Ben-Jacob, Eshel, Shapira, Yoash
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2016
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4841595/
https://www.ncbi.nlm.nih.gov/pubmed/27105224
http://dx.doi.org/10.1371/journal.pone.0154196
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author Berman, Yonatan
Ben-Jacob, Eshel
Shapira, Yoash
author_facet Berman, Yonatan
Ben-Jacob, Eshel
Shapira, Yoash
author_sort Berman, Yonatan
collection PubMed
description The rapid increase of wealth inequality in the past few decades is one of the most disturbing social and economic issues of our time. Studying its origin and underlying mechanisms is essential for policy aiming to control and even reverse this trend. In that context, controlling the distribution of income, using income tax or other macroeconomic policy instruments, is generally perceived as effective for regulating the wealth distribution. We provide a theoretical tool, based on the realistic modeling of wealth inequality dynamics, to describe the effects of personal savings and income distribution on wealth inequality. Our theoretical approach incorporates coupled equations, solved using iterated maps to model the dynamics of wealth and income inequality. Notably, using the appropriate historical parameter values we were able to capture the historical dynamics of wealth inequality in the United States during the course of the 20th century. It is found that the effect of personal savings on wealth inequality is substantial, and its major decrease in the past 30 years can be associated with the current wealth inequality surge. In addition, the effect of increasing income tax, though naturally contributing to lowering income inequality, might contribute to a mild increase in wealth inequality and vice versa. Plausible changes in income tax are found to have an insignificant effect on wealth inequality, in practice. In addition, controlling the income inequality, by progressive taxation, for example, is found to have a very small effect on wealth inequality in the short run. The results imply, therefore, that controlling income inequality is an impractical tool for regulating wealth inequality.
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spelling pubmed-48415952016-04-29 The Dynamics of Wealth Inequality and the Effect of Income Distribution Berman, Yonatan Ben-Jacob, Eshel Shapira, Yoash PLoS One Research Article The rapid increase of wealth inequality in the past few decades is one of the most disturbing social and economic issues of our time. Studying its origin and underlying mechanisms is essential for policy aiming to control and even reverse this trend. In that context, controlling the distribution of income, using income tax or other macroeconomic policy instruments, is generally perceived as effective for regulating the wealth distribution. We provide a theoretical tool, based on the realistic modeling of wealth inequality dynamics, to describe the effects of personal savings and income distribution on wealth inequality. Our theoretical approach incorporates coupled equations, solved using iterated maps to model the dynamics of wealth and income inequality. Notably, using the appropriate historical parameter values we were able to capture the historical dynamics of wealth inequality in the United States during the course of the 20th century. It is found that the effect of personal savings on wealth inequality is substantial, and its major decrease in the past 30 years can be associated with the current wealth inequality surge. In addition, the effect of increasing income tax, though naturally contributing to lowering income inequality, might contribute to a mild increase in wealth inequality and vice versa. Plausible changes in income tax are found to have an insignificant effect on wealth inequality, in practice. In addition, controlling the income inequality, by progressive taxation, for example, is found to have a very small effect on wealth inequality in the short run. The results imply, therefore, that controlling income inequality is an impractical tool for regulating wealth inequality. Public Library of Science 2016-04-22 /pmc/articles/PMC4841595/ /pubmed/27105224 http://dx.doi.org/10.1371/journal.pone.0154196 Text en © 2016 Berman et al http://creativecommons.org/licenses/by/4.0/ This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Berman, Yonatan
Ben-Jacob, Eshel
Shapira, Yoash
The Dynamics of Wealth Inequality and the Effect of Income Distribution
title The Dynamics of Wealth Inequality and the Effect of Income Distribution
title_full The Dynamics of Wealth Inequality and the Effect of Income Distribution
title_fullStr The Dynamics of Wealth Inequality and the Effect of Income Distribution
title_full_unstemmed The Dynamics of Wealth Inequality and the Effect of Income Distribution
title_short The Dynamics of Wealth Inequality and the Effect of Income Distribution
title_sort dynamics of wealth inequality and the effect of income distribution
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4841595/
https://www.ncbi.nlm.nih.gov/pubmed/27105224
http://dx.doi.org/10.1371/journal.pone.0154196
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