Wealth inequality: A study of corporate productivity and social polarization

Disparity mechanisms

To prosper in a free competition situation, it is necessary to take on the largest competitors that one stands a chance of beating. In other words, winners compete with other winners, and losers compete with other losers.

Businesses that keep winning will prosper and grow. In this way, wealth flows to a small number of winners, creating greater inequality.

These winners leave the rest of the field far, far behind. Nowadays, most consumer products are within the reach of ordinary people. What is the value of money to a winner who keeps on winning?

Economic bubbles and inequality

The only products that a successful winner might be interested in buying are financial products and real estate.

Since financial products and real estate are investments, such purchases will only serve to increase their wealth further still. How big can their wealth grow?

Financial transactions require both sellers and buyers. In other words, if the inequality gets too large, then there will be nobody big enough to trade with the winners. Previous bubble economies have burst once a certain level of inequality has been reached.

Estimating production functions

A production function is a function describing the relationship between a company’s production factors (e.g., its human resources, technologies and capital investment) and the quantity of products it makes using these factors.

A company with high capital investment will often have abundant human resources at its disposal, and it is difficult to discover which production factors are important. By performing multiple regression with multiple correlated production factors, it is also necessary to find a functional type.

We are working on the development of a production function estimation method that facilitates both the control and forecasting of production volumes by combining conventional cause-and-effect estimation methods with machine learning.

References

[1] T. Mizuno, A. Ishikawa, S. Fujimoto, T. Watanabe (2012) Progress of Theoretical Physics Supplement 194, pp.122-134.

[2] A. Ishikawa, S. Fujimoto, T. Mizuno, T. Watanabe (2016) Evolutionary and Institutional Economics Review 13, pp 409–422.

[3] A. Ishikawa, S. Fujimoto, T. Mizuno (2020) 投稿中

Mizuno Laboratory

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