When does inequality freeze an economy?

Isaac Pérez Castillo

Isaac Pérez Castillo, Department of Complex Systems, Institute of Physics, UNAM

Inequality and its consequences are the subject of intense recent debate. Using a simplified model of the economy, in this seminar we address the relation between inequality and liquidity, the latter understood as the frequency of economic exchanges. Assuming a Pareto distribution of wealth for the agents, that is consistent with empirical findings, we find an inverse relation between wealth inequality and overall liquidity. We show that an increase in the inequality of wealth results in an even sharper concentration of the liquid financial resources. This leads to a congestion of the flow of goods and the arrest of the economy when the Pareto exponent reaches one.

Location

LML, 14 Buckingham Street, London, WC2N 6DF

Date & Time

Monday 20th June 2016 at 14.00hrs

Registration

LML Seminars are free to attend and no registration is required.