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Generalizing the Inequality Process’ Gamma Model of Particle Wealth Statistics

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  • Angle, John

Abstract

The Inequality Process (IP) has been tested and confirmed against data on incomes that are approximately gamma distributed. The IP’s gamma pdf model implies statistics of IP particle wealth expressed algebraically in terms of IP parameters but only for the subset of IP parameters that generate approximately gamma distributions of particle wealth. Many empirical distributions of income and wealth have heavier-than-gamma right tails. This paper shows that a variance-gamma (VG) model can do what the IP’s gamma pdf model does, but for the full set of IP particle parameters, thus generalizing the IP's gamma pdf model without loss of parsimony because the parameters and statistics of both pdf models are re-expressed in terms of the same IP parameters.

Suggested Citation

  • Angle, John, 2021. "Generalizing the Inequality Process’ Gamma Model of Particle Wealth Statistics," MPRA Paper 107847, University Library of Munich, Germany, revised 04 Feb 2021.
    • Handle: RePEc:pra:mprapa:107847
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    References listed on IDEAS

    as
    1. Madan, Dilip B & Seneta, Eugene, 1990. "The Variance Gamma (V.G.) Model for Share Market Returns," The Journal of Business, University of Chicago Press, vol. 63(4), pages 511-524, October.
    2. Fiorani, Filo, 2004. "Option Pricing Under the Variance Gamma Process," MPRA Paper 15395, University Library of Munich, Germany.
    3. Ribeiro,Marcelo Byrro, 2020. "Income Distribution Dynamics of Economic Systems," Cambridge Books, Cambridge University Press, number 9781107092532.
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    More about this item

    Keywords

    gamma pdf; heavier-than-gamma tails; Inequality Process; particle parameters; particle wealth; variance-gamma pdf;
    All these keywords.

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General
    • D30 - Microeconomics - - Distribution - - - General

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