Income inequality and mobility in geometric Brownian motion with stochastic resetting: theoretical results and empirical evidence of non-ergodicity
- We explore the role of non-ergodicity in the relationship between income inequality, the extent of concentration in the income distribution, and income mobility, the feasibility of an individual to change their position in the income rankings. For this purpose, we use the properties of an established model for income growth that includes 'resetting' as a stabilizing force to ensure stationary dynamics. We find that the dynamics of inequality is regime-dependent: it may range from a strictly non-ergodic state where this phenomenon has an increasing trend, up to a stable regime where inequality is steady and the system efficiently mimics ergodicity. Mobility measures, conversely, are always stable over time, but suggest that economies become less mobile in non-ergodic regimes. By fitting the model to empirical data for the income share of the top earners in the USA, we provide evidence that the income dynamics in this country is consistently in a regime in which non-ergodicity characterizes inequality and immobility. Our results canWe explore the role of non-ergodicity in the relationship between income inequality, the extent of concentration in the income distribution, and income mobility, the feasibility of an individual to change their position in the income rankings. For this purpose, we use the properties of an established model for income growth that includes 'resetting' as a stabilizing force to ensure stationary dynamics. We find that the dynamics of inequality is regime-dependent: it may range from a strictly non-ergodic state where this phenomenon has an increasing trend, up to a stable regime where inequality is steady and the system efficiently mimics ergodicity. Mobility measures, conversely, are always stable over time, but suggest that economies become less mobile in non-ergodic regimes. By fitting the model to empirical data for the income share of the top earners in the USA, we provide evidence that the income dynamics in this country is consistently in a regime in which non-ergodicity characterizes inequality and immobility. Our results can serve as a simple rationale for the observed real-world income dynamics and as such aid in addressing non-ergodicity in various empirical settings across the globe.This article is part of the theme issue 'Kinetic exchange models of societies and economies'.…
Author details: | Viktor Stojkoski, Petar Jolakoski, Arnab Pal, Trifce SandevORCiDGND, Ljupco Kocarev, Ralf MetzlerORCiDGND |
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DOI: | https://doi.org/10.1098/rsta.2021.0157 |
ISSN: | 1364-503X |
ISSN: | 1471-2962 |
Pubmed ID: | https://pubmed.ncbi.nlm.nih.gov/35400188 |
Title of parent work (English): | Philosophical transactions of the Royal Society A: Mathematical, physical and engineering sciences |
Publisher: | Royal Society |
Place of publishing: | London |
Publication type: | Article |
Language: | English |
Date of first publication: | 2022/04/11 |
Publication year: | 2022 |
Release date: | 2024/06/18 |
Tag: | geometric Brownian motion; income inequality; income mobility; non-ergodicity; stochastic resetting |
Volume: | 380 |
Issue: | 2224 |
Article number: | 20210157 |
Number of pages: | 17 |
Funding institution: | Foundation for Polish Science (Fundacja na rzecz Nauki Polskiej, FNR);; Alexander von Humboldt Honorary Polish Research Scholarship |
Organizational units: | Mathematisch-Naturwissenschaftliche Fakultät / Institut für Physik und Astronomie |
DDC classification: | 5 Naturwissenschaften und Mathematik / 53 Physik |
Peer review: | Referiert |
License (German): | Keine öffentliche Lizenz: Unter Urheberrechtsschutz |