It is well known that the analysis of income (or wealth) distributions shows a ubiquitous feature: the division into two classes. A minority wealthy class whose distribution obeys a Pareto power law, while most individuals earn incomes that a Gibbs distribution or log-normal functions can fit. Several econophysics models can successfully reproduce this general characteristic by considering only the income or wealth held by the economic entities [1,2].

Nevertheless, societies have other forms of distinguishing their individuals. Inequalities among ethnicity, gender, and race are examples of divided societies where people from a particular subgroup have status, power, and wealth. Indeed, in many societies, dominant classes are composed of people associated with one of the groups, and economic inequality might be related to this non-economical classification [3,4].

This subject caught the attention of Nobel prize winner David Card, who has studied the wages of White and non-White workers in Brazil and showed that not only education and access to social programs affect the income of persons belonging to each race. According to his work, the sort of non-White workers in lower-wage positions can be related to different hiring policies for each group, which affects the incomes and increases the gap between individuals of the different races [5].

This talk presents a novel agent-based model that mimics a society composed of two distinct social groups and addresses the study of how different economic rules impact the dynamics and equilibrium of economic inequality measures. The model of pairwise exchanges studies the dynamics and equilibria of the economy of a society composed of two social groups, where individuals are characterized by their wealth, saving tendencies, and the group to which they belong. The agents interact with others within its group or those from the other group, with the interaction rate, which is a controlled parameter. The economic rules are not uniform across all individuals. One group has more social protection to the poor in intra-group exchanges than the other. Inter-group trades obey an exclusive protection rule, representing a public policy to reduce inequality.

The results clearly show that the difference in the internal social protections affects the Gini indexes of both groups and the whole society. Additionally, it is responsible for the wealth flowing between groups, making the protected group richer without making it substantially more unequal. Inter-group social protection also interferes on the groups' economies. Curiously, the results also show that no inter-group protection is preferable than small protection in terms of rising equality and prevents the loss of wealth from one group to the other.

References:

[1] A. A. Drăgulescu and V. M. Yakovenko, European Physics Journal B 20, 585 (2001).

[2] B.-H. Cardoro, J. R. Iglesias, S. Gonçalves, Physica A 579, 126123 (2021).

[3] D. B. Grusky, Social stratification, class, race and gender in sociological perspective. 2nd edition (Cornell University, New York, 2019).

[4] A. Shaikh, N. Papanikolaou, and N. Wiener, Physica A 415, 54 (2014).

[5] F. Gerard, L. Lagos, E. Severnini, and D. Card, American Economic Review, 11(10), 3418 (2021).