Kinetic Exchange Models for Income and Wealth Distributions

TL;DR

This paper discusses how kinetic exchange models from physics can explain the distribution patterns of income and wealth, highlighting their similarities to energy distributions in gases and addressing deviations at income extremes.

Contribution

It introduces the application of kinetic exchange models to income and wealth distributions, providing insights into their statistical patterns and deviations.

Findings

Income and wealth distributions resemble Gibbs distributions in gases.

Deviations occur at low and high income ranges.

Physics-inspired models help understand economic inequality.

Abstract

Increasingly, a huge amount of statistics have been gathered which clearly indicates that income and wealth distributions in various countries or societies follow a robust pattern, close to the Gibbs distribution of energy in an ideal gas in equilibrium. However, it also deviates in the low income and more significantly for the high income ranges. Application of physics models provides illuminating ideas and understanding, complementing the observations.