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Entrepreneurs, Chance, and the Deterministic Concentration of Wealth

Figure 1

Concentration of wealth over time.

All simulations start with an even distribution of wealth. Unless otherwise noted, all simulations were run with 100,000 individuals and a 5% yearly average return on investment. Red lines show the analytically expected trajectories (Eqn. 1); points show the results from individual-based simulations. Three replicate simulations were run for each high variance simulation. (A) Higher variance among individual rates of return increases the rate of wealth concentration. (B) Inequality as measured by the Gini coefficient also increases over time. (C) Wealth concentrates even when the mean growth rate varies over time, such that in some years the total economy grows and in others the economy shrinks. Average annual rates of return were randomly drawn from a normal distribution with % and , with a new value for the economy drawn each year. (D) Population growth and splitting estates among heirs does not significantly reduce rate of wealth concentration. Dashed blue line shows the growing population. (E) A tax on inherited fortunes slows and arrests the concentration of wealth. (F) Immigrants with mean wealth slow but do not arrest the concentration of wealth. Dashed blue line shows population increase from immigration.

Figure 1