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Generalizing the Inequality Process’ Gamma Model of Particle Wealth Statistics

Angle, John (2021): Generalizing the Inequality Process’ Gamma Model of Particle Wealth Statistics.

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Abstract

The Inequality Process (IP) has been tested and confirmed against data on incomes that are approximately gamma distributed. The IP’s gamma pdf model implies statistics of IP particle wealth expressed algebraically in terms of IP parameters but only for the subset of IP parameters that generate approximately gamma distributions of particle wealth. Many empirical distributions of income and wealth have heavier-than-gamma right tails. This paper shows that a variance-gamma (VG) model can do what the IP’s gamma pdf model does, but for the full set of IP particle parameters, thus generalizing the IP's gamma pdf model without loss of parsimony because the parameters and statistics of both pdf models are re-expressed in terms of the same IP parameters.

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