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

Fabio Clementi and Mauro Gallegati

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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.

Date: 2005-04, Revised 2006-03
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Published in Chatterjee, A., Yarlagadda, S., and Chakrabarti B. K. (2005). Econophysics of Wealth Distributions. Milan: Springer-Verlag Italia. (pp. 3-14)

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Working Paper: Pareto's Law of Income Distribution: Evidence for Grermany, the United Kingdom, and the United States (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:physics/0504217

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