Is the Pareto–Lévy law a good representation of income distributions?

John Dagsvik (), Zhiyang Jia, Bjørn Vatne () and Weizhen Zhu ()

Empirical Economics, 2013, vol. 44, issue 2, 719-737

Abstract: Mandelbrot (Int Econ Rev 1:79–106, 1960 ) proposed using the so-called Pareto–Lévy class of distributions as a framework for representing income distributions. We argue in this article that the Pareto–Lévy distribution is an interesting candidate for representing income distributions because its parameters are easy to interpret and it satisfies a specific invariance-under-aggregation property. We also demonstrate that the Gini coefficient can be expressed as a simple formula of the parameters of the Pareto–Lévy distribution. We subsequently use income data for Norway and seven other OECD countries to fit the Pareto–Lévy distribution as well as the Generalized Beta type II (GB2) distribution. The results show that the Pareto–Lévy distribution fits the data better than the GB2 distribution for most countries, despite the fact that GB2 distribution has four parameters whereas the Pareto–Lévy distribution has only three. Copyright Springer-Verlag 2013

Keywords: Stable distributions; Pareto–Lévy distribution; Income distributions; Invariance principles; Generalized Beta type II distributions (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00181-011-0539-z (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Is the Pareto-Lévy Law a Good Representation of Income Distributions? (2011)
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:spr:empeco:v:44:y:2013:i:2:p:719-737

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-011-0539-z

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().