Investment Talent and the Pareto Wealth Distribution: Theoretical and Experimental Analysis
The empirically documented Pareto wealth distribution at high wealth levels implies rather extreme wealth inequality. Is this inequality primarily due to differential talent, or is it due to luck? The answer to this question has profound political, social, and philosophical implications, as well as implications regarding market efficiency. We address this question theoretically and with a unique investment experiment with equal initial endowments and real out-of-pocket money. We show that the empirically observed Pareto distribution implies that luck, rather than differential investment talent, is the main force driving inequality at high wealth levels. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 85 (2003)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:85:y:2003:i:3:p:709-725. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kristin Waites)
If references are entirely missing, you can add them using this form.