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An alternative method for modeling the size distribution of top wealth

Yuanjun Wang and Shibing You

Physica A: Statistical Mechanics and its Applications, 2016, vol. 457, issue C, 443-453

Abstract: The Pareto distribution has been widely applied in modeling the distribution of wealth, as well as top incomes, cities and firms. However, recent evidence has shown that the Pareto distribution is not consistent with many situations in which it was previously considered applicable. We propose an alternative method for estimating the upper tail distribution of wealth and suggest a new Lorenz curve for building models to provide such estimates. Applying our new models to the Forbes World’s Billionaire Lists, we show that they significantly outperform the Pareto Lorenz curve as well as some other popular alternatives.

Keywords: Lorenz curve; Wealth distribution; Power-law; Top wealth (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:457:y:2016:i:c:p:443-453

DOI: 10.1016/j.physa.2016.03.025

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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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