http://swrc.ontoware.org/ontology#TechnicalReport
Zipf's Law, Pareto's Law, and the Evolution of Top Incomes in the U.S
en
JEL Codes: D31, L11, O40
income distribution
wealth distribution
Pareto exponent
top income share
firm size distribution
Zipf's law
Aoki Shuhei
Nirei Makoto
This paper presents a tractable dynamic general equilibrium model of income and firm-size distributions. The size and value of firms result from idiosyncratic, firm-level productivity shocks. CEOs can invest in their own firms’ risky stocks or in risk-free assets, implying that the CEO’s asset and income also depend on firm-level productivity shocks. We analytically show that this model generates the Pareto distribution of top income earners and Zipf’s law of firms in the steady state. Using the model, we evaluate how changes in tax rates can account for the recent evolution of top incomes in the U.S. The model matches the decline in the Pareto exponent of income distribution and the trend of the top 1% income share in the U.S. in recent decades. In the model, the lower marginal income tax for CEOs strengthens their incentive to increase the share of their firms’ risky stocks in their own asset portfolios. This leads to both higher dispersion and concentration of income in the top income group.
2012～2016年度科学研究費補助金[基盤研究(S)]「長期デフレの解明」(研究代表者 東京大学経済学研究科・渡辺努, 課題番号：24223003)
JSPS Grants-in-Aid for Scientific Research (S) Understanding Persistent Deflation in Japan Working Paper Series
040
2014-04
UTokyo Price Project
http://www.price.e.u-tokyo.ac.jp/researchdata/