A New Model for the Income Distribution

Abstract

In this study, we propose a kinetic trap--diffusion model to describe the emergence of Pareto distributions in money-exchange systems. Using kinetic Monte Carlo simulations, we show that the Pareto exponent depends explicitly on temperature and takes values in the range $0.5 \leq ν(T) \leq 1.5$. In the present framework, the temperature $T$ acts as a control parameter that regulates the exchange dynamics through thermally activated diffusion. Unlike conventional kinetic exchange models, where the Pareto exponent is fixed by microscopic rules, the proposed model generates a range of Pareto exponents as a function of $T$. The temperature-dependent Pareto exponent constitutes the central novelty of the proposed kinetic trap--diffusion framework. This feature provides a natural explanation for the empirically observed variations in Pareto exponents across different countries and economic conditions. In addition, the fraction of zero-wealth agents and the Gini index exhibit a non-monotonic dependence on temperature, revealing distinct dynamical regimes arising from the competition between trapping and money mobility. The persistence of the Pareto-like stationary distribution under strongly nonuniform initial conditions further supports the robustness of the proposed mechanism. These results show that different Pareto-tail and inequality regimes can emerge from the same trap--diffusion dynamics through changes in a single control parameter