The Nonuniversality of Wealth Distribution Tails Near Wealth Condensation Criticality

TL;DR

This paper shows that the tail behavior of wealth distributions near criticality is highly sensitive to redistribution policies, challenging the idea of a universal wealth distribution tail shape in societies close to wealth condensation.

Contribution

It generalizes the affine wealth model to include arbitrary redistribution policies, revealing that wealth distribution tails are policy-dependent rather than universal.

Findings

Exponential tail at criticality is a special case within a broader class of decay behaviors.

Tail decay rates depend on the asymptotic form of redistribution policies.

Most major economies are near-critical, making policy impacts on wealth distribution crucial.

Abstract

In this work, we modify the affine wealth model of wealth distributions to examine the effects of nonconstant redistribution on the very wealthy. Previous studies of this model, restricted to flat redistribution schemes, have demonstrated the presence of a phase transition to a partially wealth-condensed state, or "partial oligarchy," at the critical value of an order parameter. These studies have also indicated the presence of an exponential tail in wealth distribution precisely at criticality. Away from criticality, the tail was observed to be Gaussian. In this work, we generalize the flat redistribution within the affine wealth model to allow for an essentially arbitrary redistribution policy. We show that the exponential tail observed near criticality in prior work is, in fact, a special case of a much broader class of critical, slower-than-Gaussian decays that depend sensitively on the corresponding asymptotic behavior of the progressive redistribution model used. We thereby demonstrate that the functional form of the tail of the wealth distribution in a near-critical society is not universal in nature but rather entirely determined by the specifics of public policy decisions. This is significant because most major economies today are observed to be near-critical.