International and Domestic Trading and Wealth Distribution

16 Pages Posted: 22 Jul 2008

See all articles by Bertram Düring

Bertram Düring

University of Warwick - Mathematics Institute

Giuseppe Toscani

University of Pavia

Date Written: July 21, 2008

Abstract

We introduce and discuss a kinetic model for wealth distribution in a simple market economy which is built of a number of countries or social groups. Our approach is based on the model with risky investments introduced by Cordier, Pareschi and Toscani and borrows ideas from the kinetic theory of mixtures of rarefied gases. Wealth is exchanged by individuals inside these countries (domestic trade) as well as in between different countries (international trade). Under a suitable scaling we derive a system of Fokker-Planck type equations and discuss its extension to a two-dimensional model with distributed trading propensity. Theoretical and numerical results for two groups show that the wealth distribution develops a bimodal (and in general, a polymodal) shape.

Keywords: Wealth and income distributions, Boltzmann equation, mixture

JEL Classification: D31

Suggested Citation

Düring, Bertram and Toscani, Giuseppe, International and Domestic Trading and Wealth Distribution (July 21, 2008). Available at SSRN: https://ssrn.com/abstract=1165174 or http://dx.doi.org/10.2139/ssrn.1165174

Bertram Düring (Contact Author)

University of Warwick - Mathematics Institute ( email )

Zeeman Building
Coventry, CV4 7AL
United Kingdom

Giuseppe Toscani

University of Pavia ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

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