The Gompertz-Pareto Income Distribution

Details The Gompertz-Pareto Income Distribution The Gompertz-Pareto Income Distribution

2010-10-11

arxiv.org/abs/1010.1994v1

Physica A 390 (2011) 689-698

Economy

Quantitative Finance

General Finance

13 pages, 5 figures, LaTeX. Accepted for publication in "Physica A"

Scientific paper

10.1016/j.physa.2010.10.014

This work analyzes the Gompertz-Pareto distribution (GPD) of personal income, formed by the combination of the Gompertz curve, representing the overwhelming majority of the economically less favorable part of the population of a country, and the Pareto power law, which describes its tiny richest part. Equations for the Lorenz curve, Gini coefficient and the percentage share of the Gompertzian part relative to the total income are all written in this distribution. We show that only three parameters, determined by linear data fitting, are required for its complete characterization. Consistency checks are carried out using income data of Brazil from 1981 to 2007 and they lead to the conclusion that the GPD is consistent and provides a coherent and simple analytical tool to describe personal income distribution data.

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