Abstract :
This article presents a model of the 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 nonexistence of the equal steady state means that a oneshot
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 creates jobs. Due to
this dual nature of self-employment, 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
