Numerical Simulations of How Economic Inequality Increases in Democratic Countries
It is not easy to perform a numerical simulation of the path to a steady state in dynamic economic growth models in which households behave by generating rational expectations. It is much easier, however, if households are assumed to behave according to a procedure based on the maximum degree of comfortability (MDC), where MDC indicates the state at which a household feels most comfortable with its combination of income and assets. In this paper, I simulate how economic inequality increases in democratic countries under the supposition that households behave according to the MDC-based procedure. The results indicate that high levels of economic inequality can be generated and even increase in a democracy. As causes, I postulate households’ misunderstandings of the economic situation, a government against certain groups in the economy, or an upward trend in temporary rent incomes. I then present a criterion for establishing the socially acceptable level of economic inequality and point out a practical shortfall arising from the inability to distinguish temporary economic rents.
Harashima, T. (2023). Numerical Simulations of How Economic Inequality Increases in Democratic Countries. Journal of Applied Economic Sciences, Volume XVIII, Fall, 3(81), 221 – 246. https://doi.org/10.57017/jaes.v18.3(81).07
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