Growth and fluctuations of personal income

DOI10.1016/S0378-4371(02)01663-1zbMATH Open1011.91069arXivcond-mat/0208398OpenAlexW1980713885MaRDI QIDQ1867902FDOQ1867902

Taisei Kaizoji, Wataru Souma, Masanao Aoki, Yoshi Fujiwara, Hideaki Aoyama

Publication date: 2 April 2003

Published in: Physica A (Search for Journal in Brave)

Abstract: Pareto's law states that the distribution of personal income obeys a power-law in the high-income range, and has been supported by international observations. Researchers have proposed models over a century since its discovery. However, the dynamical nature of personal income has been little studied hitherto, mostly due to the lack of empirical work. Here we report the first such study, an examination of the fluctuations in personal income of about 80,000 high-income taxpayers in Japan for two consecutive years, 1997 and 1998, when the economy was relatively stable. We find that the distribution of the growth rate in one year is independent of income in the previous year. This fact, combined with an approximate time-reversal symmetry, leads to the Pareto law, thereby explaining it as a consequence of a stable economy. We also derive a scaling relation between positive and negative growth rates, and show good agreement with the data. These findings provide the direct observation of the dynamical process of personal income flow not yet studied as much as for companies.

Full work available at URL: https://arxiv.org/abs/cond-mat/0208398

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zbMATH Keywords

approximate time-reversal symmetrygrowth-rate relationPareto-law states

Mathematics Subject Classification ID

Economic growth models (91B62)

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Cited In (12)

• Distribution of wealth in a network model of the economy
• Basic kinetic wealth-exchange models: common features and open problems
• A unified framework for the Pareto law and matthew effect using scale-free networks
• Money creation process in a random redistribution model
• Growth and fluctuations of personal and company's income
• A geometrical imaging of the real gap between economies of China and the United States
• Measuring income inequality: a robust semi-parametric approach
• SCALING LAWS IN THE MACROECONOMY
• Firm growth function and extended-Gibrat's property
• Scaling in income inequalities and its dynamical origin
• Title not available (Why is that?)
• Fluctuation of firm size in the long-run and bimodal distribution

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