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2013 | OriginalPaper | Buchkapitel

9. Dynamics: Many Time Periods

verfasst von : Prof. PierCarlo Nicola

Erschienen in: Efficiency and Equity in Welfare Economics

Verlag: Springer Berlin Heidelberg

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Abstract

The purpose of this chapter is to present the last simulation, which will asses the dynamics of the model proposed in Chap. 7.

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Vorheriges Kapitel Implementing the Example: One Time Period

Nächstes Kapitel Final Remarks

Apparently, this statement seems to contradict the choice of an initial equal distribution of income among agents, made in Sect. 9.4.1. The choice is made to underline the income differences that soon appear when maximizing social output in the first time period.

A more general model could be considered in which individual productivity parameters are increasing functions of the income quotas devoted by agents to their job qualification. Then, in every period, t, individual j’s income, y _j(t), would be split into three parts: consumption, education, social input.

Note that in Chap. 7 we chose to consider the overall returns to scale parameter, γ as not greater than 1.

A different measure of the individuals’ input contribution to social production is \(\hat{{z}}_{j}{(1)}^{{\beta }_{j}}\), instead of \(\hat{{z}}_{j}(1)\) as here chosen. This choice greatly enhances individual income differences.

This is equivalent, as already underlined, to imposing a uniform 20% income tax rate on those agents who are not very poor.

Of course, as a byproduct of this calculation, we obtain the vector of income transfers, \(v(1) = ({v}_{1}(1),{v}_{2}(1),\ldots,{v}_{1000}(1))\), verifying \({x}_{j}(1) = {y}_{j}(1) + {v}_{j}(1)\) for every j index.

As frequently pointed out, a smaller choice of q, for instance q = 0. 1, has a weaker effect on final income redistribution.

A value impossible to obtain in any real economy on an annual basis.

Remember the Note in Sect. 9.6.1.

Titel: Dynamics: Many Time Periods
verfasst von: Prof. PierCarlo Nicola
Verlag: Springer Berlin Heidelberg
Buch: Efficiency and Equity in Welfare Economics
Print ISBN: 978-3-642-30070-7

Electronic ISBN: 978-3-642-30071-4

Copyright-Jahr: 2013
DOI: https://doi.org/10.1007/978-3-642-30071-4_9