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Stability of an exponential distribution for New Zealand taxable personal income

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  • R. John Irwin
  • Timothy C. Irwin

Abstract

This paper examines the distribution of taxable personal income in New Zealand during 2000–2012 and finds that it is approximately exponential. Although the exponential Lorenz curve is parameter free (and implies a Gini coefficient of exactly 0.5), it, nevertheless, describes the distribution over the period surprisingly well, despite changes in the economy, tax rates, and the definition of taxable income; observed Gini coefficients are all in the interval (0.493, 0.528). Although the exponential could in principle be explained by a simple process, such as additive shocks to wages, no such account appears plausible or consistent with the diversity of the sources of taxable personal income. The exponential distribution is, however, the most likely distribution to arise (i.e. has maximum entropy) subject only to the constraints that incomes are positive and have a given mean.

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  • R. John Irwin & Timothy C. Irwin, 2017. "Stability of an exponential distribution for New Zealand taxable personal income," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(1), pages 49-59, January.
    • Handle: RePEc:taf:nzecpp:v:51:y:2017:i:1:p:49-59
    DOI: 10.1080/00779954.2015.1130739
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    Cited by:

    1. Tao, Yong & Lin, Li & Wang, Hanjie & Hou, Chen, 2023. "Superlinear growth and the fossil fuel energy sustainability dilemma: Evidence from six continents," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 39-51.

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