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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)

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

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

Note: Type of Document - pdf; pages: 8
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Web page: http://129.3.20.41

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

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Find related papers by JEL classification:
D1 - Microeconomics - - Household Behavior
D2 - Microeconomics - - Production and Organizations
D3 - Microeconomics - - Distribution
D4 - Microeconomics - - Market Structure and Pricing

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Quantitative Finance Papers cond-mat/9804100, arXiv.org. [Downloadable!]
  2. Adrian Dragulescu & Victor M. Yakovenko, 2001. "Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States," Quantitative Finance Papers cond-mat/0103544, arXiv.org, revised Mar 2001. [Downloadable!]
  3. Makoto Nirei & Wataru Souma, 2007. "A Two Factor Model Of Income Distribution Dynamics," Review of Income and Wealth, Blackwell Publishing, vol. 53(3), pages 440-459, 09. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Jess Benhabib & Alberto Bisin, 2006. "The distribution of wealth and redistributive policies," Levine's Working Paper Archive 122247000000001162, David K. Levine. [Downloadable!]
    Other versions:
  2. Fabio Clementi & Mauro Gallegati, 2005. "Pareto's Law of Income Distribution: Evidence for Grermany, the United Kingdom, and the United States," Microeconomics 0505006, EconWPA. [Downloadable!]
    Other versions:
  3. Tommaso Ciarli & André Lorentz & Maria Savona & Marco Valente, 2008. "The Effect of Consumption and Production Structure on Growth and Distribution. A Micro to Macro Model," Papers on Economics and Evolution 2008-13, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  4. Jess Benhabib & Alberto Bisin, 2009. "The distribution of wealth and fiscal policy in economies with finitely lived agents," NBER Working Papers 14730, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Makowsky, Michael, 2009. "Religion, Clubs, and Emergent Social Divides," MPRA Paper 14359, University Library of Munich, Germany. [Downloadable!]
  6. Guimarães, P. W., 2006. "Variação de renda familiar, desigualdade e pobreza no Brasil no período 2001 a 2005
    [Variation of famliy income, inequality and poverty in Brazil in the period 2001 to 2005]    ," MPRA Paper 5517, University Library of Munich, Germany, revised 2006. [Downloadable!]
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