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A Note on the Size Distribution of Consumption: More Double Pareto than Lognormal

Alexis Akira Toda ()

MPRA Paper from University Library of Munich, Germany

Abstract: The cross-sectional distribution of consumption is commonly approximated by the lognormal distribution. This note shows that consumption is better described by the double Pareto-lognormal distribution (dPlN), which has a lognormal body with two Pareto tails and arises as the stationary distribution in recently proposed dynamic general equilibrium models. dPlN outperforms other parametric distributions and is often not rejected by goodness-of-fit tests. The analytical tractability and parsimony of dPlN may be convenient for various economic applications.

Keywords: Gibrat's law; multiplicative idiosyncratic risk; inequality; power law (search for similar items in EconPapers)
JEL-codes: D31 E21 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2015-10-29
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Related works:
Journal Article: A NOTE ON THE SIZE DISTRIBUTION OF CONSUMPTION: MORE DOUBLE PARETO THAN LOGNORMAL (2017) Downloads
Working Paper: A NOTE ON THE SIZE DISTRIBUTION OF CONSUMPTION: MORE DOUBLE PARETO THAN LOGNORMAL (2016) Downloads
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