Dale, Charles (1985): A Test of the Stable Paretian Hypothesis for the Distribution of Income. Published in: American Statistical Association, Proceedings of the Business and Economic Statistics Section, Las Vegas, Nevada (5 August 1985): pp. 543545.

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Abstract
Mandelbrot has recently proposed that the distribution of income might be described by a class of mathematical processes called Stable Paretian functions. These functions have many of the desirable properties of Gaussian distributions but they have infinite variance, which has implications for making projections. Since Mandelbrot’s hypothesis applies only to very high income families, his ideas are of interest to the Army because children in high income families have a low propensity to enlist in the military, so an increasingly affluent population could have an effect on Army recruiting. This paper concludes that the distribution of income cannot be adequately described by either lognormal or Stable Paretian distributions. So, forecasters of the distribution of income do not need to deal with infinite variances, and may assume only that the underlying distributions are stationary.
Item Type:  MPRA Paper 

Original Title:  A Test of the Stable Paretian Hypothesis for the Distribution of Income 
Language:  English 
Keywords:  Income distribution; Stable Paretian; Military recruiting 
Subjects:  C  Mathematical and Quantitative Methods > C4  Econometric and Statistical Methods: Special Topics > C40  General C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C69  Other J  Labor and Demographic Economics > J1  Demographic Economics 
Item ID:  49272 
Depositing User:  Dr. Charles Dale 
Date Deposited:  24 Aug 2013 18:18 
Last Modified:  08 Oct 2019 01:52 
References:  Champernowne, D. G., “A Model of Income Distribution,” Economic Journal, Vol. LXIII, No. 250, June 1953, 318351. Dale, C., “Projections of the Youth Population from High Income Families,” presented to the National Forum on Human Resource Planning, Baltimore, Maryland, May 910, 1985. Lydall, H. T., “The Distribution of Employment Incomes,” Econometrica, Vol. 27, 1959, 110115. Mandelbrot, B., "The ParetoLevy Law and the Distribution of Income,” International Economic Review, Vol. 1, No. 2, May 1960, 79106. Mandelbrot, B., “Stable Paretian Random Functions and the Multiplicative Variation of Income,” Econometrica, Vol. 29, No. 4, October 1961, 517543. Mandelbrot, B., “New Methods in Statistical Economics,” Journal of Political Economy, Vol. 71, No. 5, October 1963, 421440. Mandelbrot, B., “The Fractal Geometry of Nature,” New York: W. H. Freeman and Co., 1983. Pasinetti, L. L., “The Rate of Interest and the Distribution of Income in a Pure Labor Economy,” Journal of Post Keynesian Economics, Vol. 3, No. 2, Winter 1980, 170182. Ring, R. J., Jr., “Variability of Inflation and Income Across Income Classes,” Social Science Quarterly, Vol. 66, No. 1, March 1985, 203209. U.S. Department of Commerce, Bureau of the Census, “Current Population Reports,” Series P60, Various Issues, 1978 to 1984. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/49272 