Stock-flow consistent macroeconomic model with nonuniform distributional constraint

TL;DR

This paper develops a partially aggregated stock-flow consistent macroeconomic model with a focus on household wealth distribution, linking it to mass transport problems and analyzing critical points using Monte Carlo methods with French data.

Contribution

It introduces a novel approach by reducing the wealth distribution constraint to a single equation and applying mass transport theory to macroeconomic modeling.

Findings

Identifies the critical point before wealth condensation occurs.

Provides marginal probabilities for household wealth distribution.

Demonstrates the model with French wealth and income data.

Abstract

We report on results concerning a partially aggregated Stock Flow Consistent (SFC) macroeconomic model in the stationary state where the sectors of banks and firms are aggregated, the sector of households is dis-aggregated, and the probability density function (pdf) of the wealth of households is exogenous, constrained by econometric data. It is shown that the equality part of the constraint can be reduced to a single constant-sum equation, which relates this problem to the study of continuous mass transport problems, and to the sum of iid random variables. Existing results can thus be applied, and provide marginal probabilities, and the location of the critical point before condensation occurs. Various numerical experiments are performed using Monte Carlo sampling of the hit-and-run type, using wealth and income data for France.