Kitov, Ivan (2007): Modeling the evolution of Gini coefficient for personal incomes in the USA between 1947 and 2005.
Download (336Kb) | Preview
The evolution of Gini coefficient for personal incomes in the USA between 1947 and 2005 is analyzed and modeled. There are several versions of personal income distribution (PID) provided by the US Census Bureau (US CB) for this period with various levels of resolution. Effectively, these PIDs result in different Gini coefficients due to the differences between discrete and continuous representations. When all persons of 15 years of age and over are included in the PIDs, Gini coefficient drops from 0.64 in 1947 to 0.54 in 1990. This effect is observed due to a significant decrease in the portion of people without income. For the PIDs not including persons without income, Gini coefficient is varying around 0.51 between 1960 and 2005 with standard deviation of 0.004, i.e. is in fact constant. This Gini coefficient is practically independent on the portion of population included in the PIDs according to any revision of income definitions. The driving force of the model describing the evolution of individual incomes (microeconomic level) and their aggregate value (macroeconomic level) is the change in nominal GDP per capita. The model accurately predicts the evolution of Gini coefficient for the PIDs for people with income. The model gives practically unchanged (normalized) PIDs and Gini coefficient between 1947 and 2005. The empirical Gini curves converge to the predicted one when the number of people without income decreases. Asymptotically, the empirical curves should collapse to the theoretical one when all the working age population obtains an appropriate definition of income. Therefore the model Gini coefficient potentially better describes true behavior of inequality in the USA because the definitions of income used by the US Census Bureau apparently fail to describe true income distribution.
|Item Type:||MPRA Paper|
|Original Title:||Modeling the evolution of Gini coefficient for personal incomes in the USA between 1947 and 2005|
|Keywords:||Gini index; personal income distribution; Pareto distribution; microeconomic modeling; USA; real GDP; macroeconomics|
|Subjects:||E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E17 - Forecasting and Simulation: Models and Applications
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E64 - Incomes Policy; Price Policy
J - Labor and Demographic Economics > J1 - Demographic Economics
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development
D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles
|Depositing User:||Ivan Kitov|
|Date Deposited:||19. Apr 2007|
|Last Modified:||18. Feb 2013 20:47|
Dragulesky, A., and Yakovenko, V. (2001). Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States. Physica A: Statistical Mechanics and its Applications, 299, 1-2 , 213-221 Kitov, I. (2005a). A model for microeconomic and macroeconomic development. Working Paper 05, ECINEQ, Society for the Study of Economic Inequality. Kitov, I. (2005b). Modeling the overall personal income distribution in the USA from 1994 to 2002. Working Paper 07, ECINEQ, Society for the Study of Economic Inequality Kitov, I. (2005c). Evolution of the personal income distribution in the USA: High incomes. Working Paper 02, ECINEQ, Society for the Study of Economic Inequality Kitov, I. (2006a). Modeling the age-dependent personal income distribution in the USA. Working Paper 17, ECINEQ, Society for the Study of Economic Inequality Neal, D. and Rosen, S. (2000). Theories of the distribution of earnings. In: Handbook of Income Distribution, (Eds.) Atkinson, A. and Bourguinon, F., 379-427, Elsevier 2000. Rodionov, V.N., Tsvetkov, V.M., and Sizov, I.A. (1982). Principles of Geomechanics. Nedra, Moscow, p.272. (in Russian) U.S. Census Bureau. (2000). The Changing Shape of the Nation's Income Distribution. Retrieved February 26, 2007 from http://www.census.gov/prod/2000pubs/p60-204.pdf U.S. Census Bureau. (2002). Technical Paper 63RV: Current Population Survey - Design and Methodology, issued March 2002. Retrieved February 26, 2007 from http://www.census.gov/prod/2002pubs/tp63rv.pdf US Census Bureau. (2006). Current Population Reports. Consumer Income Reports from 1946-2005. (P60). Retrieved March 14, 2007 from http://www.census.gov/prod/ www/abs/income.html) US Census Bureau. (2007). Population Estimates. Retrieved March 14, 2007 from http://www.census.gov/popest Yakovenko, V. (2003). Research in Econophysics. Cond-mat/0302270. Retrieved April 8, 2004 from http://www.physics.umd.edu/news/photon/isss24/Yakovenko_article .pdf