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Retrospectives: Pareto's Law

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  • Joseph Persky

Abstract

Vilfredo Pareto, using data for England, a number of Italian cities, several German states, Paris, and Peru, plotted cumulative distributions of income for these countries on double logarithmic paper. He claimed that in each case the result was a straight line with about the same slope. Thus, he asserted a law of income distribution. I discuss Pareto's discovery of this relationship; his theory of income distribution; Pareto's Law and Pareto optimality; the attack on Pareto's Law; the counterattack; and the more recent literature. For all the excesses of the Paretian camp followers, there remains the significant insight that the history of all hitherto existing society is a history of social hierarchies. There is the feel of structure behind income distributions. Something is going on here.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.6.2.181
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 6 (1992)
Issue (Month): 2 (Spring)
Pages: 181-192

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Handle: RePEc:aea:jecper:v:6:y:1992:i:2:p:181-92

Note: DOI: 10.1257/jep.6.2.181
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  1. Chipman, John S., 1974. "The welfare ranking of Pareto distributions," Journal of Economic Theory, Elsevier, vol. 9(3), pages 275-282, November.
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Cited by:
  1. Frank A Cowell, 2007. "Income Distribution and Inequality," STICERD - Distributional Analysis Research Programme Papers 94, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Xavier Gabaix, 2008. "Power Laws in Economics and Finance," NBER Working Papers 14299, National Bureau of Economic Research, Inc.
  3. Gutiérrez-Romero, Roxana, 2007. "The impact of Inequality on Economic Growth: Evidence for Mexico 1895-1994," Proceedings of the German Development Economics Conference, Göttingen 2007 11, Verein für Socialpolitik, Research Committee Development Economics.
  4. Homburg, Stefan, 1997. "Ursachen und Wirkungen eines zwischenstaatlichen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 61-95.
  5. Herzlinger, Regina E., 2010. "Healthcare reform and its implications for the U.S. economy," Business Horizons, Elsevier, vol. 53(2), pages 105-117, March.
  6. Levy, Moshe, 2003. "Are rich people smarter?," Journal of Economic Theory, Elsevier, vol. 110(1), pages 42-64, May.
  7. Castaldi, Carolina & Milakovic, Mishael, 2007. "Turnover activity in wealth portfolios," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 537-552, July.
  8. Mornati Fiorenzo, 2005. "Sulle origini della legge di distribuzione del reddito di Pareto," CESMEP Working Papers 200503, University of Turin.
  9. Klass, Oren S. & Biham, Ofer & Levy, Moshe & Malcai, Ofer & Solomon, Sorin, 2006. "The Forbes 400 and the Pareto wealth distribution," Economics Letters, Elsevier, vol. 90(2), pages 290-295, February.

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