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Power-law behavior and inequality in the upper tail of wealth, income and consumption: evidence from India

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  • Kumar, Rishabh

    (University of Massachusetts Boston)

Abstract

This paper analyzes the upper tails of wealth, income, and consumption in India over the period 2012-18 using rich- lists, wealth surveys, income tax returns and consumer expenditure surveys. We find the upper tail to obey a power- law in all three economic resources. Comparing our estimates in 2012 – where we possess data on wealth, income, and consumption simultaneously – we find that the upper tail of wealth is most concentrated, income slightly less, and consumption is much less concentrated. Unlike wealth and income, the Pareto coefficients for consumption are estimated to have a well-defined mean and variance. Our findings are suggestive of convex saving functions in the income distribution.

Suggested Citation

  • Kumar, Rishabh, 2024. "Power-law behavior and inequality in the upper tail of wealth, income and consumption: evidence from India," OSF Preprints 298js, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:298js
    DOI: 10.31219/osf.io/298js
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    References listed on IDEAS

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    1. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, May.
    2. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
    3. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-397, July.
    4. Xavier Gabaix & Rustam Ibragimov, 2011. "Rank - 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 24-39, January.
    5. Anwar Shaikh, 2017. "Income Distribution, Econophysics and Piketty," Review of Political Economy, Taylor & Francis Journals, vol. 29(1), pages 18-29, January.
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