Power Law Tails in the Italian Personal Income Distribution

Details Power Law Tails in the Italian Personal Income Distribution Power Law Tails in the Italian Personal Income Distribution

2004-08-03

arxiv.org/abs/cond-mat/0408067v1

Physica A: Statistical Mechanics and its Applications, Vol: 350, Issue: 2-4, May 15, 2005, pp. 427-438

Physics

Condensed Matter

Other Condensed Matter

Latex2e v1.6; 14 pages with 10 figures; preprint submitted to Physica A

Scientific paper

10.1016/j.physa.2004.11.038

We investigate the shape of the Italian personal income distribution using microdata from the Survey on Household Income and Wealth, made publicly available by the Bank of Italy for the years 1977--2002. We find that the upper tail of the distribution is consistent with a Pareto-power law type distribution, while the rest follows a two-parameter lognormal distribution. The results of our analysis show a shift of the distribution and a change of the indexes specifying it over time. As regards the first issue, we test the hypothesis that the evolution of both gross domestic product and personal income is governed by similar mechanisms, pointing to the existence of correlation between these quantities. The fluctuations of the shape of income distribution are instead quantified by establishing some links with the business cycle phases experienced by the Italian economy over the years covered by our dataset.

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