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Evolution of the personal income distribution in the USA: High incomes

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  • Ivan O. Kitov

Abstract

The personal income distribution (PID) above the Pareto threshold is studied and modeled. A microeconomic model is proposed to simulate the PID and its evolution below and above the Pareto income threshold. The model balances processes of income production and dissipation for any person above 15 years of age. The model accurately predicts the observed dependence of the number of people reaching the Pareto threshold on work experience and the functional dependence of the relationship on the per capita real GDP growth for the period from 1994 to 2002. Predictions of the income distribution depending on age are given for past and future. In future, relatively less rich people are observed in the younger age groups and the peak of the relative number shifts to older ages with time. The effect of the power law distribution extending itself to very high incomes is speculated to be the cause of low performance of socialist countries.

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File URL: http://arxiv.org/pdf/0811.0352
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Bibliographic Info

Paper provided by arXiv.org in its series Papers with number 0811.0352.

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Date of creation: Nov 2008
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Handle: RePEc:arx:papers:0811.0352

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  1. Ivan O. Kitov, 2005. "A model for microeconomic and macroeconomic development," Working Papers 05, ECINEQ, Society for the Study of Economic Inequality.
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Cited by:
  1. Ivan O. Kitov, 2007. "Modeling the evolution of Gini coefficient for personal incomes in the USA between 1947 and 2005," Working Papers 67, ECINEQ, Society for the Study of Economic Inequality.
  2. Ivan O. Kitov, 2008. "Modelling the average income dependence on work experience," Papers 0811.0489, arXiv.org.
  3. Kitov, Ivan & Kitov, Oleg, 2013. "The dynamics of personal income distribution and inequality in the United States," MPRA Paper 48649, University Library of Munich, Germany.
  4. Gertrudes Sa├║de Guerreiro, 2012. "Regional Income Distribution in Portugal," CEFAGE-UE Working Papers 2012_06, University of Evora, CEFAGE-UE (Portugal).

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