An agent-based model of trickle-up growth and income inequality

We build an agent-based model to study how coordination failures, credit constraints and unequal access to investment opportunities affect inequality and aggregate income dynamics. We show that macroeconomic conditions are affected by income distribution and that the model features a trickle-up growth dynamics. Redistribution towards poorer households raises demand and is beneficial for all agents' income growth. Simulations show that our model reproduces several stylized facts concerning income inequality and social mobility. Finally, we find that fiscal policies facilitating access to investment opportunities by poor households have the largest impact, raising income and decreasing inequality, with policy timing being crucial.