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Power Law Tails in the Italian Personal Income Distribution

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Author Info

  • Fabio Clementi

    (Department of Public Economics, University of Rome 'La Sapienza')

  • Mauro Gallegati

    (Department of Economics, Università Politecnica delle Marche)

Abstract

We investigate the shape of the Italian personal income distribution using microdata from the Survey on Household Income and Wealth, made publicly available by the Bank of Italy for the years 1977-2002. We find that the upper tail of the distribution is consistent with a Pareto power-law type distribution, while the rest follows a two-parameter lognormal distribution. The results of our analysis show a shift of the distribution and a change of the indexes specifying it over time. As regards the first issue, we test the hypothesis that the evolution of both gross domestic product and personal income is governed by similar mechanisms, pointing to the existence of correlation between these quantities. The fluctuations of the shape of income distribution are instead quantified by establishing some links with the business cycle phases experienced by the Italian economy over the years covered by our dataset.

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File URL: http://128.118.178.162/eps/mic/papers/0505/0505005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0505005.

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Length: 8 pages
Date of creation: 18 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0505005

Note: Type of Document - pdf; pages: 8
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Web page: http://128.118.178.162

Related research

Keywords: Personal income; Pareto law; Lognormal distribution; Income growth rate; Business cycle;

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  1. Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Papers cond-mat/9804100, arXiv.org.
  2. Makoto Nirei & Wataru Souma, 2007. "A Two Factor Model Of Income Distribution Dynamics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(3), pages 440-459, 09.
  3. Drăgulescu, Adrian & Yakovenko, Victor M., 2001. "Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 213-221.
  4. Adrian Dragulescu & Victor M. Yakovenko, 2001. "Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States," Papers cond-mat/0103544, arXiv.org, revised Mar 2001.
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