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Evolution of the personal income distribution in the USA: High incomes

Author

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  • Ivan O. Kitov

    () (Russian Academy of Sciences)

Abstract

The personal income distribution (PID) above the Pareto threshold is studied and modeled. A microeconomic model is proposed to simulate the PID and its evolution below and above the Pareto income threshold. The model balances processes of income production and dissipation for any person above 15 years of age. The model accurately predicts the observed dependence of the number of people reaching the Pareto threshold on work experience and the functional dependence of the relationship on the per capita real GDP growth for the period from 1994 to 2002. Predictions of the income distribution depending on age are given for past and future. In future, relatively less rich people are observed in the younger age groups and the peak of the relative number shifts to older ages with time. The effect of the power law distribution extending itself to very high incomes is speculated to be the cause of low performance of socialist countries.

Suggested Citation

  • Ivan O. Kitov, 2005. "Evolution of the personal income distribution in the USA: High incomes," Working Papers 02, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2005-02
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2005-02.pdf
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    1. Ivan O. Kitov, 2005. "A model for microeconomic and macroeconomic development," Working Papers 05, ECINEQ, Society for the Study of Economic Inequality.
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    Cited by:

    1. Ivan O. KITOV, 2008. "The Driving Force of Labor Force Participation in Developed Countries," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(3(5)_Fall), pages 203-222.
    2. Gertrudes Sa├║de Guerreiro, 2012. "Regional Income Distribution in Portugal," CEFAGE-UE Working Papers 2012_06, University of Evora, CEFAGE-UE (Portugal).
    3. Kitov, Ivan & Kitov, Oleg, 2015. "Gender income disparity in the USA: analysis and dynamic modelling," MPRA Paper 67146, University Library of Munich, Germany.
    4. Ivan Kitov, 2007. "Modeling the Evolution of Gini Coefficient for Personal Incomes in the Usa Between 1947 and 2005," Mechonomics mechonomics8, Socionet.
    5. Kitov, Ivan & Kitov, Oleg, 2013. "The dynamics of personal income distribution and inequality in the United States," MPRA Paper 48649, University Library of Munich, Germany.
    6. Kitov, Ivan, 2008. "Modeling the evolution of age-dependent Gini coefficient for personal incomes in the U.S. between 1967 and 2005," MPRA Paper 10107, University Library of Munich, Germany.
    7. Ivan O. Kitov, 2008. "Modelling the average income dependence on work experience," Papers 0811.0489, arXiv.org.

    More about this item

    Keywords

    personal income distribution; Pareto distribution; microeconomic modeling; USA; real GDP; macroeconomics;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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