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Growth and fluctuations of personal income

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  • Fujiwara, Yoshi
  • Souma, Wataru
  • Aoyama, Hideaki
  • Kaizoji, Taisei
  • Aoki, Masanao

Abstract

Pareto's law states that the distribution of personal income obeys a power-law in the high income range. Its dynamical nature has been little studied hitherto, mostly due to the lack of empirical work. Using an exhaustive list of taxpayers in Japan for two consecutive years, when the economy was relatively stable, we report here that the law is a consequence from universal distribution of the growth rate of income and approximate time-reversal symmetry of incomes in the successive years. We also find a relation between positive and negative growth rates that shows good agreement with the data.

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Bibliographic Info

Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 321 (2003)
Issue (Month): 3 ()
Pages: 598-604

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Handle: RePEc:eee:phsmap:v:321:y:2003:i:3:p:598-604

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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

Related research

Keywords: Pareto's law; Personal income; Growth-rate; Multiplicative process; Econophysics;

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References

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  1. Adrian Dragulescu & Victor M. Yakovenko, 2001. "Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States," Papers cond-mat/0103544, arXiv.org, revised Mar 2001.
  2. Bouchaud, Jean-Philippe & Mézard, Marc, 2000. "Wealth condensation in a simple model of economy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 282(3), pages 536-545.
  3. Aoki,Masanao, 2004. "Modeling Aggregate Behavior and Fluctuations in Economics," Cambridge Books, Cambridge University Press, number 9780521606196, 9.
  4. Jean-Philippe Bouchaud & Marc Mezard, 2000. "Wealth condensation in a simple model of economy," Science & Finance (CFM) working paper archive 500026, Science & Finance, Capital Fund Management.
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Citations

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Cited by:
  1. Guo, Qiang & Gao, Li, 2012. "Distribution of individual incomes in China between 1992 and 2009," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(21), pages 5139-5145.
  2. Sitabhra Sinha, 2005. "The Rich Are Different!: Pareto Law from asymmetric interactions in asset exchange models," Papers physics/0504197, arXiv.org.
  3. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
  4. Patriarca, Marco & Chakraborti, Anirban & Germano, Guido, 2006. "Influence of saving propensity on the power-law tail of the wealth distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 723-736.
  5. Thomas Lux, 2007. "Application of Statistical Physics in Finance and Economics," Working Papers, Warwick Business School, Finance Group wp07-09, Warwick Business School, Finance Group.
  6. Bottazzi, Giulio, 2009. "On the irreconcilability of Pareto and Gibrat laws," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(7), pages 1133-1136.
  7. Aoyama, Hideaki & Fujiwara, Yoshi & Souma, Wataru, 2004. "Kinematics and dynamics of Pareto–Zipf's law and Gibrat's law," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 117-121.
  8. Tomson Ogwang, 2011. "Power laws in top wealth distributions: evidence from Canada," Empirical Economics, Springer, Springer, vol. 41(2), pages 473-486, October.
  9. Ogwang, Tomson, 2013. "Is the wealth of the world’s billionaires Paretian?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 757-762.
  10. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frédéric Abergel, 2011. "Econophysics: agent-based models," Post-Print hal-00621059, HAL.
  11. Victor M. Yakovenko, 2012. "Applications of statistical mechanics to economics: Entropic origin of the probability distributions of money, income, and energy consumption," Papers 1204.6483, arXiv.org.
  12. Chakrabarti, Anindya S. & Chakrabarti, Bikas K., 2010. "Statistical theories of income and wealth distribution," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(4), pages 1-31.
  13. Anand Banerjee & Victor M. Yakovenko, 2009. "Universal patterns of inequality," Papers 0912.4898, arXiv.org, revised Apr 2010.
  14. Cui, Jian & Pan, Qiuhui & Qian, Qian & He, Mingfeng & Sun, Qilin, 2013. "A multi-agent dynamic model based on different kinds of bequests," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(6), pages 1393-1397.

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