Kaldasch, Joachim (2012): Evolutionary Model of the Personal Income Distribution.
Download (726kB) | Preview
The aim of this work is to establish the personal income distribution from the elementary constituents of a free market; products of a representative good and agents forming the economic network. The economy is treated as a self-organized system. Based on the idea that the dynamics of an economy is governed by slow modes, the model suggests that for short time intervals a fixed ratio of total labour income (capital income) to net income exists (Cobb-Douglas relation). Explicitly derived is Gibrat’s law from an evolutionary market dynamics of short term fluctuations. The total private income distribution is shown to consist of four main parts. From capital income of private firms the income distribution contains a lognormal distribution for small and a Pareto tail for large incomes. Labour income contributes an exponential distribution. Also included is the income from a social insurance system, approximated by a Gaussian peak. The evolutionary model is able to reproduce the stylized facts of the income distribution, shown by a comparison with empirical data of a high resolution income distribution. The theory suggests that in a free market competition between products is ultimately the origin of the uneven income distribution.
|Item Type:||MPRA Paper|
|Original Title:||Evolutionary Model of the Personal Income Distribution|
|Keywords:||income distribution; labour income; capital income; Gibrat's law; power law distribution; exponential distribution; Laplace distribution; evolutionary economics; self-organization; competition; price dispersion|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
D - Microeconomics > D3 - Distribution > D33 - Factor Income Distribution
D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E11 - Marxian ; Sraffian ; Kaleckian
|Depositing User:||Joachim Kaldasch|
|Date Deposited:||07. Apr 2012 12:29|
|Last Modified:||05. Apr 2015 07:36|
A. Chaterjee, S.Yarlagadda, B.K. Chakrabarti, Econophysics of Wealth Distributions, Springer (2005).
V. Pareto, Cours d’Economie Politique, Lausanne, (1897)
R. Gibrat, Les Inegalites Economiques, Sirey, Paris (1913).
V.M. Yakovenko, J. B. Rosser, Colloquium: Statistical Mechanics of Money, Wealth, and Income, Reviews of Modern Physics 81, (2009) 1703-1725.
H. Haken, Synergetics, An Introduction, Springer (1983).
J. Kaldasch, Evolutionary Model of an Anonymous Consumer Durable Market, Physica A, 390, (2011) 2692-2715.
Th. Modis, Predictions, Simon & Schuster (1992).
J. Kaldasch, Evolutionary Model of the Growth and Size of Firms, Physica A, 391, (2012) 3751-3769.
C.W. Dobb, P.H. Douglas, A Theory of Production, American Economic Review 18, (1929) 139-165.
G. Yule, A mathematical Theory of Evolution based on the Conclusions of Dr. J.C. Willis, F.R.S. Philosophical Transactions of the Royal Society of London (Series B) 213 (1925), 21-87.
D.-F. Fu, F. Pammolli, S.V. Buldyev, M. Riccaboni, K. Matia, K. Yamasaki, H. E. Stanley, The growth of business firms: Theoretical framework and empirical evidence, Proc. Natl. Acad. Sci. USA, 102 (2005) 18801-18806.
S.V. Buldyev, F. Pammolli, M. Riccaboni, K. Yamasaki, D.–F. Fu, K. Matia, H. E. Stanley, A generalized preferential attachement model for business firms growth rates, Eur. Phys. J. B 57 (2007) 131-138.
S. Hollensen, Marketing Management: A Relationship Approach, Pearson Education (2010).
D. Sornette, Critical Phenomena in Natural Sciences, Springer Berlin (2006).
A. Banerjee, V.M. Yakovenko, T. Di Matteo, A study of the personal income distribution in Australia, Physica A 370 (2006) 54–59.
J. Growiec, F. Pammolli, M. Riccaboni, H.E. Stanley, On the size distribution of business firms, Economic Letters 98 (2008) 207-212. R. L. Axtell, Zipf Distribution of Firm Sizes, Science, 293 (2001)1818-1820.
M.Barigozzi, L.Alessi, M. Capasso, G. Fagiolo, The Distribution of Households Consumption-Expenditure Budget Shares, European Central Bank Working Paper Series No.1061
B.B. Mandelbrot, R.L. Hudson, The (Mis) Behaviour of Markets: A Fractal View of Risk, Ruin and Reward. Profile Books (2005).
J. Kaldasch, Evolutionary Model of Non-Durable Markets, preprint Arxiv:1109.5791 (2011).
V.M. Yakovenko, Econophysics, Statistical Approach to, in Encyclopedia of Complexity and System Science, edited by R. A. Meyers, Springer (2009).
P. Richmond, S. Solomon, Power-laws are Boltzmann Laws in Disguise, e-print: cond-mat/0010222, (2000).