Friday, March 27, 3:00 p.m.
Center for Social Complexity Suite
Research Hall, Third Floor

The Effect of Income Concentration on Long-run Economic Growth

Chris Shin, PhD Student
Computational Social Science
George Mason University

ABSTRACT: In this paper, I introduce an agent-based model to examine the effect of income concentration from poor and middle-class individuals to the rich on long-run economic growth. Under the persevering unequal distribution system, it has shown that the level of GDP per capita rose and fell while the level of inequality, measured by GINI Index, continued to soar. Such results confirm the wide-spreading belief that when the poor and middle-class can no longer afford to buy goods and services, the whole economy collapses. Once calibrated and validated against empirical data, some policy suggestions are examined to relieve the income concentration problem. Interestingly, I discovered that income subsidy such as transfer is not as much efficient as other studies have suggested: a trade off between economic growth and inequality. However, it is found that a minimum wage policy would do a better job - the entire economy becomes better off while it slows the increase of inequality.