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.
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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
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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.:
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