Dynamism of investment: wealth visibility facilitates economic mobility

Abstract

Although the impact of wealth disparity on choices regarding risky investments is a pressing issue in modern society, experimental or theoretical studies focusing on this issue remain scarce. In the present study, we examine how the increasing visibility of others’ wealth, which is accelerated by information technology and financialization of the economy, affects people’s investment behavior, wealth accumulation, and economic mobility. To do so, we design an economic experiment with the investment (private goods provision) game and conduct a structural estimation based on a learning model. We have two main findings. First, low-ranked people (i.e., the poor) are more likely to invest when the wealth distribution of others is visible than when it is not. Second, active investment enables people to move frequently in the economic hierarchy and decreases wealth disparity.