Income Distribution among Individuals: The effects of economic interactions
AbstractIncome distribution (except for very high incomes) is widely understood to be well described by a log-normal distribution. Existing research has modeled an individual's income as an independent stochastic process to explain the observed log-normality. In this paper, I propose a stochastic model whereby an individual's income is not independent, but instead depends crucially on the incomes of other members of the economy. The model clarifies how the effects of economic interactions work. It turns out that they are favorable toward the wealthy as they enable them to keep their status with high probability. This represents a universal structure of economic systems.
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.
Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13042.
Length: 9 pages
Date of creation: May 2013
Date of revision:
Contact details of provider:
Postal: 11th floor, Annex, Ministry of Economy, Trade and Industry (METI) 1-3-1, Kasumigaseki Chiyoda-ku, Tokyo, 100-8901
Web page: http://www.rieti.go.jp/
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
- Sahota, Gian Singh, 1978. "Theories of Personal Income Distribution: A Survey," Journal of Economic Literature, American Economic Association, vol. 16(1), pages 1-55, March.
- Levy, Moshe, 2003. "Are rich people smarter?," Journal of Economic Theory, Elsevier, vol. 110(1), pages 42-64, May.
- Maxim Pinkovskiy & Xavier Sala-i-Martin, 2009. "Parametric Estimations of the World Distribution of Income," NBER Working Papers 15433, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (NUKATANI Sorahiko).
If references are entirely missing, you can add them using this form.