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Redistributing Income Through Hierarchy

Author

Listed:
  • Fix, Blair

Abstract

Although the determinants of income are complex, the results are surprisingly uniform. To a first approximation, top incomes follow a power-law distribution, and the redistribution of income corresponds to a change in the power-law exponent. Given the messiness of the struggle for resources, why is the outcome so simple? This paper explores the idea that the (re)distribution of top incomes is uniform because it is shaped by a ubiquitous feature of social life, namely hierarchy. Using a model first developed by Herbert Simon and Harold Lydall, I show that hierarchy can explain the power-law distribution of top incomes, including how income gets redistributed as the rich get richer.

Suggested Citation

  • Fix, Blair, 2021. "Redistributing Income Through Hierarchy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 98, pages 58-86.
    • Handle: RePEc:zbw:espost:247778
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    References listed on IDEAS

    as
    1. Fix, Blair, 2019. "Personal Income and Hierarchical Power," SocArXiv pb475, Center for Open Science.
    2. A. B. Atkinson, 2017. "Pareto and the Upper Tail of the Income Distribution in the UK: 1799 to the Present," Economica, London School of Economics and Political Science, vol. 84(334), pages 129-156, April.
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    4. Blair Fix, 2018. "Hierarchy and the power-law income distribution tail," Journal of Computational Social Science, Springer, vol. 1(2), pages 471-491, September.
    5. Anthony Atkinson & Thomas Piketty, 2010. "Top Incomes : A Global Perspective," PSE-Ecole d'économie de Paris (Postprint) halshs-00754875, HAL.
    6. Fix, Blair, 2021. "Redistributing income through hierarchy," Working Papers on Capital as Power 2021/04, Capital As Power - Toward a New Cosmology of Capitalism.
    7. Fix, Blair, 2017. "Energy and Institution Size," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 12(2), pages 1-22.
    8. David R. Roberts, 1956. "A General Theory of Executive Compensation Based on Statistically Tested Propositions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(2), pages 270-294.
    9. Fix, Blair, 2021. "The Rise of Human Capital Theory," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 95, pages 29-41.
    10. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1993. "Hierarchies and compensation: A case study," European Economic Review, Elsevier, vol. 37(2-3), pages 366-378, April.
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    13. Clementi, F. & Gallegati, M., 2005. "Power law tails in the Italian personal income distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 350(2), pages 427-438.
    14. Fix, Blair, 2018. "Hierarchy and the Power-Law Income Distribution Tail," OSF Preprints u95dk, Center for Open Science.
    15. Blair Fix, 2019. "Personal Income and Hierarchical Power," Journal of Economic Issues, Taylor & Francis Journals, vol. 53(4), pages 928-945, October.
    16. Facundo Alvaredo & Anthony Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1% in International and Historical Perspective," Post-Print halshs-00847231, HAL.
    17. Fix, Blair, 2021. "Economic Development and the Death of the Free Market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Latest Ar, pages 1-1.
    18. Hager, Sandy Brian, 2020. "Varieties of Top Incomes," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 18(4), pages 1175-1198.
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    21. Blair Fix, 2017. "Energy and institution size," PLOS ONE, Public Library of Science, vol. 12(2), pages 1-22, February.
    22. Matt Hopkins & William Lazonick, 2016. "The Mismeasure of Mammon: Uses and Abuses of Executive Pay Data," Working Papers Series 49, Institute for New Economic Thinking.
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    25. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
    26. Toda, Alexis Akira, 2012. "The double power law in income distribution: Explanations and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 364-381.
    27. Fix, Blair, 2018. "Hierarchy and the Power-Law Income Distribution Tail," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue OnlineFir, pages 1-21.
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    More about this item

    Keywords

    corporation; despotism; government; hierarchy; income distribution; inequality; power;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D3 - Microeconomics - - Distribution

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