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. 2011 Apr;83(4 Pt 2):046122.
doi: 10.1103/PhysRevE.83.046122. Epub 2011 Apr 25.

Income dynamics with a stationary double Pareto distribution

Alexis Akira Toda  1
Affiliations

Income dynamics with a stationary double Pareto distribution

Alexis Akira Toda. Phys Rev E Stat Nonlin Soft Matter Phys. 2011 Apr.

Abstract

Once controlled for the trend, the distribution of personal income appears to be double Pareto, a distribution that obeys the power law exactly in both the upper and the lower tails. I propose a model of income dynamics with a stationary distribution that is consistent with this fact. Using US male wage data for 1970-1993, I estimate the power law exponent in two ways--(i) from each cross section, assuming that the distribution has converged to the stationary distribution, and (ii) from a panel directly estimating the parameters of the income dynamics model--and obtain the same value of 8.4.

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