Archive for November, 2008

Interacting Heterogeneous Agents Produce Endogeneous Inequality

November 3, 2008

INTERACTING HETEROGENEOUS AGENTS PRODUCE
ENDOGENOUS INEQUALITY


by MATTHIAS GREIFF, STEPHEN KINSELLA, AND EDWARD J. NELL

Here are the slides from my presentation!

Abstract: We model an abstract economy of locally interacting heterogeneous agents in four markets, to understand the generation of power law-type distributions of income inequality and firm size in advanced societies. We
model a macroeconomy with national accounts built from the interactions of agents (workers, capitalists, bankers, and the government) in time through product, labour, bond, and money markets. We show that, without any restrictions on the type of interaction agents can make, and with asymmetric information on the part of capitalists and workers in this economy, power-law dynamics with respect to firm size and income can emerge from simple multiplicative processes originating in the labour market. Using a new data set, we
use only one free parameter to fit the models to firm size and income data for Ireland from 2000 to 2006.

(presented at the EEA annual meeting 2009, New York)

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