Investment Talent and the Pareto Wealth Distribution: Theoretical and Experimental Analysis
AbstractThe empirically documented Pareto wealth distribution at high wealth levels implies rather extreme wealth inequality. Is this inequality primarily due to differential talent, or is it due to luck? The answer to this question has profound political, social, and philosophical implications, as well as implications regarding market efficiency. We address this question theoretically and with a unique investment experiment with equal initial endowments and real out-of-pocket money. We show that the empirically observed Pareto distribution implies that luck, rather than differential investment talent, is the main force driving inequality at high wealth levels. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics and Statistics.
Volume (Year): 85 (2003)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://mitpress.mit.edu/journals/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Stachurski, John & Kamihigashi, Takashi, 2014.
"Stochastic stability in monotone economies,"
Theoretical Economics, Econometric Society,
Econometric Society, vol. 9(2), May.
- Takashi Kamihigashi & John Stachurski, 2010. "Stochastic Stability in Monotone Economies," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2010-12, Research Institute for Economics & Business Administration, Kobe University.
- Takashi Kamihigashi & John Stachurski, 2013. "Stochastic Stability in Monotone Economies," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2013-02, Research Institute for Economics & Business Administration, Kobe University.
- Campante, Filipe R., 2011.
"Redistribution in a model of voting and campaign contributions,"
Journal of Public Economics, Elsevier,
Elsevier, vol. 95(7-8), pages 646-656, August.
- Campante, Filipe R., 2011. "Redistribution in a model of voting and campaign contributions," Journal of Public Economics, Elsevier, Elsevier, vol. 95(7), pages 646-656.
- Campante, Filipe, 2007. "Redistribution in a Model of Voting and Campaign Contributions," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp07-045, Harvard University, John F. Kennedy School of Government.
- repec:wii:bpaper:bowp:088 is not listed on IDEAS
- Ibragimov, Marat & Ibragimov, Rustam & Kattuman, Paul, 2013. "Emerging markets and heavy tails," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(7), pages 2546-2559.
- Rustam Ibragimov & Marat Ibragimov & Rufat Khamidov, 2010. "Measuring Inequality in CIS Countries: Theory and Empirics," wiiw Balkan Observatory Working Papers, The Vienna Institute for International Economic Studies, wiiw 88, The Vienna Institute for International Economic Studies, wiiw.
- Thomas Goda, 2014. "Global trends in relative and absolute wealth concentrations," DOCUMENTOS DE TRABAJO CIEF, UNIVERSIDAD EAFIT 010897, UNIVERSIDAD EAFIT.
- Tomson Ogwang, 2011. "Power laws in top wealth distributions: evidence from Canada," Empirical Economics, Springer, Springer, vol. 41(2), pages 473-486, October.
- Ogwang, Tomson, 2013. "Is the wealth of the world’s billionaires Paretian?," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 392(4), pages 757-762.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.