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A Pareto upper tail for capital income distribution

Author

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  • Oancea, Bogdan
  • Pirjol, Dan
  • Andrei, Tudorel

Abstract

We present a study of the capital income distribution and of its contribution to the total income (capital income share) using individual tax income data in Romania, for 2013 and 2014. Using a parametric representation we show that the capital income is Pareto distributed in the upper tail, with a Pareto coefficient α∼1.44 which is much smaller than the corresponding coefficient for wage- and non-wage-income (excluding capital income), of α∼2.53. Including the capital income contribution has the effect of increasing the overall inequality measures.

Suggested Citation

  • Oancea, Bogdan & Pirjol, Dan & Andrei, Tudorel, 2018. "A Pareto upper tail for capital income distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 492(C), pages 403-417.
    • Handle: RePEc:eee:phsmap:v:492:y:2018:i:c:p:403-417
    DOI: 10.1016/j.physa.2017.09.034
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    Citations

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    Cited by:

    1. Safari, Muhammad Aslam Mohd & Masseran, Nurulkamal & Ibrahim, Kamarulzaman & AL-Dhurafi, Nasr Ahmed, 2020. "The power-law distribution for the income of poor households," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 557(C).
    2. Tjeerd de Vries & Alexis Akira Toda, 2022. "Capital and Labor Income Pareto Exponents Across Time and Space," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(4), pages 1058-1078, December.
    3. Tomaschitz, Roman, 2020. "Multiply broken power-law densities as survival functions: An alternative to Pareto and lognormal fits," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 541(C).
    4. Muhammad Hilmi Abdul Majid & Kamarulzaman Ibrahim & Nurulkamal Masseran, 2023. "Three-Part Composite Pareto Modelling for Income Distribution in Malaysia," Mathematics, MDPI, vol. 11(13), pages 1-15, June.
    5. Safari, Muhammad Aslam Mohd & Masseran, Nurulkamal & Ibrahim, Kamarulzaman & Hussain, Saiful Izzuan, 2021. "Measuring income inequality: A robust semi-parametric approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 562(C).

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