Article ID Journal Published Year Pages File Type
974041 Physica A: Statistical Mechanics and its Applications 2016 11 Pages PDF
Abstract

•Economic stratification is measured by the entropy of the wealth distribution.•The fluctuation theorem implies a “second-law inequality” for stratification.•Precariousness is the thermodynamic force conjugate to upward economic mobility.•Precariousness and upward economic mobility together drive stratification up.•We estimate the relaxation time of the wealth distribution in a diffusion model.

Growing economic inequalities are observed in several countries throughout the world. Following Pareto, the power-law structure of these inequalities has been the subject of much theoretical and empirical work. But their nonequilibrium dynamics, e.g. after a policy change, remains incompletely understood. Here we introduce a thermodynamical theory of inequalities based on the analogy between economic stratification and statistical entropy. Within this framework we identify the combination of upward mobility with precariousness as a fundamental driver of inequality. We formalize this statement by a “second-law” inequality displaying upward mobility and precariousness as thermodynamic conjugate variables. We estimate the time scale for the “relaxation” of the wealth distribution after a sudden change of the after-tax return on capital. Our method can be generalized to gain insight into the dynamics of inequalities in any Markovian model of socioeconomic interactions.

Related Topics
Physical Sciences and Engineering Mathematics Mathematical Physics
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