Pareto's Law of Income Distribution: Evidence for Germany, the United Kingdom, and the United States
AbstractWe analyze three sets of income data: the US Panel Study of Income Dynamics PSID), the British Household Panel Survey (BHPS), and the German Socio-Economic Panel (GSOEP). It is shown that the empirical income distribution is consistent with a two-parameter lognormal function for the low-middle income group (97%-99% of the population), and with a Pareto or power law function for the high income group (1%-3% of the population). This mixture of two qualitatively different analytical distributions seems stable over the years covered by our data sets, although their parameters significantly change in time. It is also found that the probability density of income growth rates almost has the form of an exponential function.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number physics/0504217.
Date of creation: Apr 2005
Date of revision: Mar 2006
Publication status: Published in Chatterjee, A., Yarlagadda, S., and Chakrabarti B. K. (2005). Econophysics of Wealth Distributions. Milan: Springer-Verlag Italia. (pp. 3-14)
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- Fabio Clementi & Mauro Gallegati, 2005. "Pareto's Law of Income Distribution: Evidence for Grermany, the United Kingdom, and the United States," Microeconomics 0505006, EconWPA.
- D1 - Microeconomics - - Household Behavior
- D2 - Microeconomics - - Production and Organizations
- D3 - Microeconomics - - Distribution
- D4 - Microeconomics - - Market Structure and Pricing
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