A Stochastic Model of Wealth Accumulation with Class Division

In this paper we propose a stochastic model in which wealth accumulation depends on the role that agents play in the society: capitalists or workers. A random mechanism of class selection shapes the social structure of the economy based on wealth distribution dynamics. As a result, the society may evolve towards an unequal outcome with few rich and many poor individuals, even starting from perfect equality. We study the dynamic properties of the model by means of computer simulations. A maximum likelihood estimation procedure is applied to analyse the Pareto or power law tail of wealth distribution. We also provide a scenario analysis to explore the system's behaviour under alternative parameter settings.power law, social classes, wealth distribution