Pareto's Law of Income Distribution: Evidence for Grermany, the United Kingdom, and the United States

Fabio Clementi () and Mauro Gallegati ()

Microeconomics from EconWPA

Abstract: We analyze three sets of income data: the US Panel Study of Income Dynamics (PSID), the British Household Panel Survey (BHPS), and the German Socio-Economic Panel (GSOEP). It is shown that the empirical income distribution is consistent with a two-parameter lognormal function for the low-middle income group (97\%-99\% of the population), and with a Pareto or power law function for the high income group (1\%- 3\% of the population). This mixture of two qualitatively different analytical distributions seems stable over the years covered by our data sets, although their parameters significantly change in time. It is also found that the probability density of income growth rates almost has the form of an exponential function.

Keywords: Personal income; Lognormal distribution; Pareto's law; Income growth rate (search for similar items in EconPapers)
JEL-codes: D1 D2 D3 D4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2005-05-18
Note: Type of Document - ps; pages: 16
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Related works:
Working Paper: Pareto's Law of Income Distribution: Evidence for Germany, the United Kingdom, and the United States (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpmi:0505006

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