Published: April 1, 2021
Christopher Kulp, Departments of Physics and Astronomy, Lycoming College

Taxation, Redistribution, and Wealth in Simple Economic Models

The distribution of wealth has been a topic of much interest over the last several years. In this presentation, I will discuss the effects of various tax and redistribution strategies on the distribution of wealth in two economic models. In the first part of the presentation, I will discuss the effects of taxation and redistribution on a modified Bennati-Dragulescu-Yakovenko (BDY) game, an agent-based simple exchange game. Several different taxes are applied to the BDY game, some of which are modeled after past and current US tax policy. I will present the effects of various taxation and redistribution models on the BDY game's Gini coefficient, a quantitative measure of income or wealth inequality.  In the second part of the presentation, I will discuss the effects of taxation and redistribution on a simple model of inheritance. In the inheritance model, estate taxes are collected, and we'll examine how the redistribution of collected estate taxes affects the Gini coefficient and two social welfare functions of the population. Like the taxes in the BDY game, some of the estate taxes collected in the inheritance model will be modeled after US tax policy.