A Stochastic Model of Wealth Distribution

Abstract

A major research focus in economics and econophysics is on the distribution of wealth in societies at different stages of development. Wealth includes money, material goods and assets of different kinds. Knowledge of the monetary equivalent of the latter two components is required in order to quantify wealth. A related and easier to measure distribution is that of income. The major motivation of theoretical models is to provide insight on the microscopic origins of income/wealth distributions. Such distributions are expected to provide good fits to the empirical data. In the context of incomes, Champernowne [2] has commented “The forces determining the distribution of incomes in any community are so varied and complex and interact and fluctuate so continuously, that any theoretical model must either be unrealistically simplified or hopelessly complicated.” The statement highlights the desirability of finding a middle ground between the unrealistically simple and the hopelessly complicated.