Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228345
Authors: 
de Vries, Tjeerd
Akira Toda, Alexis
Year of Publication: 
2020
Series/Report no.: 
LIS Working Paper Series No. 794
Abstract: 
We estimate capital and labor income Pareto exponents across 348 country-year observations that span 51 countries over half a century. We document two stylized facts: (i) capital income is more unequally distributed than labor income; namely, the capital exponent (1-3) is smaller than labor (2-5), and (ii) capital and labor exponents are nearly uncorrelated. To explain these findings, we build an incomplete market model with job ladders and capital income risk that gives rise to a capital income Pareto exponent smaller than but nearly unrelated to the labor exponent. Our results suggest the importance of distinguishing income and wealth inequality.
Subjects: 
income fluctuation problem
inequality
power law
JEL: 
C46
D15
D31
D52
Document Type: 
Working Paper

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