EconStor >
Northwestern University >
Kellogg School of Management - Center for Mathematical Studies in Economics and Management Science, Northwestern University  >
Discussion Papers, Kellogg School of Management, Northwestern University >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/31241
  
Title:The 2005 Lawrence R. Klein lecture: emergent class structure PDF Logo
Authors:Matsuyama, Kiminori
Issue Date:2005
Series/Report no.:Discussion paper // Center for Mathematical Studies in Economics and Management Science 1407
Abstract:This paper presents a model of emergent class structure, in which a society inhabited by inherently identical households may be endogenously split into the rich bourgeoisie and the poor proletariat. For some parameter values, the model has no steady state where all households remain equally wealthy. In this case, the model predicts emergent class structure or the rise of class societies. Even if every household starts with the same amount of wealth, the society will experience symmetry-breaking” and will be polarized into two classes in steady state, where the rich maintain a high level of wealth partly due to the presence of the poor, who have no choice but to work for the rich at a wage rate strictly lower than the fair” value of labor. The non-existence of the equal steady state means that a one-shot redistribution of wealth would not be effective, as wealth inequality and the class structure would always reemerge. Thus, the class structure is an inevitable feature of capitalism. For other parameter values, on the other hand, the model has the unique steady state, which is characterized by perfect equality. In this case, the model predicts dissipating class structure or the fall of class societies. Even if the society starts with significant wealth inequality, labor demand by the rich employers pushes up the wage rate so much that workers will escape from the poverty and eventually catch up with the rich, eliminating wealth inequality and the class structure in the long run. In an extension, we introduce self-employment, which not only provides the poor with an alternative to working for the rich, but also provides the rich with an alternative to investment that create jobs. Due to this dual nature of selfemployment, the effects of self-employment turn out to be quite subtle. Yet, within the present framework, it is possible to offer a complete characterization of the steady states even in the presence of self-employment.
Subjects:Imperfect Credit Markets
Distribution of Household Wealth
Vertical Division of Labor
Endogenous Inequality
Unattainability of Classless Society
Symmetry-Breaking
JEL:D31
O11
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

Files in This Item:
File Description SizeFormat
587317299.PDF288.73 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/31241

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.