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Empirical study and model of personal income

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  • Wataru Souma
  • Makoto Nirei

Abstract

Personal income distributions in Japan are analyzed empirically and a simple stochastic model of the income process is proposed. Based on empirical facts, we propose a minimal two-factor model. Our model of personal income consists of an asset accumulation process and a wage process. We show that these simple processes can successfully reproduce the empirical distribution of income. In particular, the model can reproduce the particular transition of the distribution shape from the middle part to the tail part. This model also allows us to derive the tail exponent of the distribution analytically.

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File URL: http://arxiv.org/pdf/physics/0505173
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Paper provided by arXiv.org in its series Papers with number physics/0505173.

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Date of creation: May 2005
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Handle: RePEc:arx:papers:physics/0505173

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Cited by:
  1. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
  2. N. J. Moura & M. B. Ribeiro, 2009. "Evidence for the Gompertz curve in the income distribution of Brazil 1978–2005," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 67(1), pages 101-120, January.
  3. Willis, Geoff, 2011. "Why money trickles up – wealth & income distributions," MPRA Paper 30851, University Library of Munich, Germany.
  4. 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.
  5. Eric Smith & Duncan Foley & Benjamin Good, 2013. "Unhedgeable shocks and statistical economic equilibrium," Economic Theory, Springer, vol. 52(1), pages 187-235, January.

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