Finite market size as a source of extreme wealth inequality and market instability

Finite market size as a source of extreme wealth inequality and market instability

We study the finite-size effects in some scaling systems, and show that the finite number of agents N leads to a cut-off in the upper value of the Pareto law for the relative individual wealth. The exponent α of the Pareto law obtained in stochastic multiplicative market models is crucially affected by the fact that N is always finite in real systems. We show that any finite value of N leads to...

Market Imperfections, Wealth Inequality, and the Distribution of Trade Gains

We explore the role of the ownership structure of capital in an economy that suffers from barriers to entry and an imperfect financial system. In such an environment, an unequal distribution of capital provides an explanation for trade flows and trade gains even when countries do not differ in relative factor endowments or available technologies. Moreover, an uneven asset distribution is associ...

Wage Inequality and Instability during Early Labor Market Experience

Power Laws of Wealth, Market Order Volumes and Market Returns

Using the Generalised Lotka Volterra (GLV) model adapted to deal with muti agent systems we can investigate economic systems from a general viewpoint and obtain generic features common to most economies. Assuming only weak generic assumptions on capital dynamics, we are able to obtain very specific predictions for the distribution of social wealth. First, we show that in a ’fair’ market, the we...

Market Liquidity and Liquid Wealth

Are securities markets more liquid when the economy is more liquid? If so, why? One possibility is that market depth depends on credit constrained intermediaries. This paper offers another explanation, which does not involve frictions or market segmentation. Measuring market illiquidity by the slope of the representative agent’s demand curve for a risky asset, I show that this slope is steeper ...