Asset inequality and economic activity in artificial societies

Abstract

In this paper, using multiagent simulations, the effect asset inequality has on an artificial society is analyzed. It is shown that it is possible for a sustainable society to decrease in asset inequality and at the same time increase economic activity. In sustainable societies, the asset inequality increases as the consumption tax is raised, and in artificial societies where the tax rate is the same, inequality increases in the society in which agents with even a small surplus undertake altruistic actions. In sustainable societies that employ both income and consumption tax, an increase in asset inequalities leads to an increase in economic activity. But in sustainable societies which levy only the income tax, this result does not necessarily hold. These results show that if economic activity is increased in sustainable societies where the consumption tax rate is raised for the sake of fiscal stability, an expansion in inequality is an acceptable consequence. However, the sustainable society with the highest economic activity is realized when only the income tax is levied. In sustainable societies that levy only income tax, it is possible to decrease inequality while simultaneously increasing economic activity. © 2008 Wiley Periodicals, Inc.