A Hierarchy Model of Income Distribution

Blair Fix
Additional contact information
Blair Fix: York University

No s3y2m, SocArXiv from Center for Open Science

Abstract: Based on worldly experience, most people would agree that firms are hierarchically organized, and that pay tends to increase as one moves up the hierarchy. But how this hierarchical structure affects income distribution has not been widely studied. To remedy this situation, this paper presents a new model of income distribution that explores the effects of social hierarchy. This 'hierarchy model' takes the limited available evidence on the structure of firm hierarchies, and generalizes it to create a large-scale simulation of the hierarchical structure of the United States economy. Using this model, I conduct the first quantitative investigation of hierarchy's effect on income distribution. I find that hierarchy plays a dominant role in shaping the tail of US income distribution. The model suggests that hierarchy is responsible for generating the power-law scaling of top incomes. Moreover, I find that hierarchy can be used to unify the study of personal and functional income distribution, as well as to understand historical trends in income inequality.

Date: 2018-04-08
New Economics Papers: this item is included in nep-cmp and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://osf.io/download/5acac0ccbc673f00131596d9/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:s3y2m

DOI: 10.31219/osf.io/s3y2m

Access Statistics for this paper

More papers in SocArXiv from Center for Open Science
Bibliographic data for series maintained by OSF ().