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Evidence for Power-law tail of the Wealth Distribution in India

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  • Sitabhra Sinha

Abstract

The higher-end tail of the wealth distribution in India is studied using recently published lists of the wealth of richest Indians between the years 2002-4. The resulting rank distribution seems to imply a power-law tail for the wealth distribution, with a Pareto exponent between 0.81 and 0.92 (depending on the year under analysis). This provides a comparison with previous studies of wealth distribution, which have all been confined to Western advanced capitalist economies. We conclude with a discussion on the appropriateness of multiplicative stochastic process as a model for asset accumulation, the relation between the wealth and income distributions (we estimate the Pareto exponent for the latter to be around 1.5 for India), as well as possible sources of error in measuring the Pareto exponent for wealth.

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Paper provided by arXiv.org in its series Papers with number cond-mat/0502166.

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Date of creation: Feb 2005
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Publication status: Published in Physica A, Vol 359, pp 555-562 (2006)
Handle: RePEc:arx:papers:cond-mat/0502166

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Web page: http://arxiv.org/

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Cited by:
  1. Coelho, Ricardo & Richmond, Peter & Barry, Joseph & Hutzler, Stefan, 2008. "Double power laws in income and wealth distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3847-3851.
  2. Arnab Chatterjee & Bikas K Chakrabarti, 2005. "Ideal-Gas Like Markets: Effect of Savings," Papers physics/0507136, arXiv.org, revised Jul 2005.
  3. Tomson Ogwang, 2011. "Power laws in top wealth distributions: evidence from Canada," Empirical Economics, Springer, vol. 41(2), pages 473-486, October.
  4. Young, D.S., 2013. "Approximate tolerance limits for Zipf–Mandelbrot distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(7), pages 1702-1711.
  5. Ogwang, Tomson, 2013. "Is the wealth of the world’s billionaires Paretian?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 757-762.
  6. Guo, Qiang & Gao, Li, 2012. "Distribution of individual incomes in China between 1992 and 2009," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(21), pages 5139-5145.
  7. Carmen Pellicer-Lostao & Ricardo Lopez-Ruiz, 2010. "Transition from Exponential to Power Law Distributions in a Chaotic Market," Papers 1011.5187, arXiv.org.
  8. J. R. Iglesias & R. M. C. de Almeida, 2011. "Entropy and equilibrium state of free market models," Papers 1108.5725, arXiv.org.
  9. Patriarca, Marco & Chakraborti, Anirban & Germano, Guido, 2006. "Influence of saving propensity on the power-law tail of the wealth distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 723-736.
  10. Subramanian, S. & Jayaraj, D., 2006. "The Distribution of Household Wealth in India," Working Paper Series RP2006/116, World Institute for Development Economic Research (UNU-WIDER).
  11. Sebastian Guala, 2009. "Taxes in a Wealth Distribution Model by Inelastically Scattering of Particles," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 7(1), pages 1-7.
  12. Sebastian D. Guala, 2008. "Taxes in a simple wealth distribution model by inelastically scattering particles," Papers 0807.4484, arXiv.org.
  13. Brzezinski, Michal, 2014. "Do wealth distributions follow power laws? Evidence from ‘rich lists’," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 406(C), pages 155-162.
  14. Sitabhra Sinha, 2005. "The Rich Are Different!: Pareto Law from asymmetric interactions in asset exchange models," Papers physics/0504197, arXiv.org.
  15. Carmen Pellicer-Lostao & Ricardo Lopez-Ruiz, 2009. "Money Distributions in Chaotic Economies," Papers 0906.1899, arXiv.org.
  16. Jess Benhabib & Shenghao Zhu, 2008. "Age, Luck, and Inheritance," NBER Working Papers 14128, National Bureau of Economic Research, Inc.
  17. Chakrabarti, Anindya S. & Chakrabarti, Bikas K., 2010. "Statistical theories of income and wealth distribution," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(4), pages 1-31.

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