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Pareto law and Pareto index in the income distribution of Japanese companies

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  • Ishikawa, Atushi

Abstract

In order to study the phenomenon in detail that income distribution follows Pareto law, we analyze the database of high income companies in Japan. We find a quantitative relation between the average capital of the companies and the Pareto index. The larger the average capital becomes, the smaller the Pareto index becomes. From this relation, we can possibly explain that the Pareto index of company income distribution hardly changes, while the Pareto index of personal income distribution changes sharply, from a viewpoint of capital (or means). We also find a quantitative relation between the lower bound of capital and the typical scale at which Pareto law breaks. The larger the lower bound of capital becomes, the larger the typical scale becomes. From this result, the reason there is a (no) typical scale at which Pareto law breaks in the income distribution can be understood through (no) constraint, such as the lower bound of capital or means of companies, in the financial system.

Suggested Citation

  • Ishikawa, Atushi, 2005. "Pareto law and Pareto index in the income distribution of Japanese companies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 349(3), pages 597-608.
    • Handle: RePEc:eee:phsmap:v:349:y:2005:i:3:p:597-608
    DOI: 10.1016/j.physa.2004.10.023
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    References listed on IDEAS

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    1. Fujiwara, Yoshi & Di Guilmi, Corrado & Aoyama, Hideaki & Gallegati, Mauro & Souma, Wataru, 2004. "Do Pareto–Zipf and Gibrat laws hold true? An analysis with European firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 335(1), pages 197-216.
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    Cited by:

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    2. Anindya S. Chakrabarti, 2011. "Firm dynamics in a closed, conserved economy: A model of size distribution of employment and related statistics," Papers 1112.2168, arXiv.org.
    3. Anindya S. Chakrabarti, 2013. "Bimodality in the firm size distributions: a kinetic exchange model approach," Papers 1302.3818, arXiv.org, revised May 2013.
    4. Néda, Zoltán & Gere, István & Biró, Tamás S. & Tóth, Géza & Derzsy, Noemi, 2020. "Scaling in income inequalities and its dynamical origin," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 549(C).
    5. Gere, István & Kelemen, Szabolcs & Tóth, Géza & Biró, Tamás S. & Néda, Zoltán, 2021. "Wealth distribution in modern societies: Collected data and a master equation approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 581(C).
    6. Zoltan Neda & Istvan Gere & Tamas S. Biro & Geza Toth & Noemi Derzsy, 2019. "Scaling in Income Inequalities and its Dynamical Origin," Papers 1911.02449, arXiv.org, revised Mar 2020.

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