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12 is 0,626 + 0,004 (data for 1962/63). The regression coefficient corresponds to our k. That k <! 1 can be explained in the first place by the presumed fact that with increasing wealth earned income is less and less important; in the second place perhaps by the fact that income from shares which dominates for the larger wealth does not contain the undistributed profits. Since the Pareto coefficient for wealth was 1,38 in 1962/63, we should expect it to be 2,20 for income on the basis of the theory. In reality it was 2,08. A better correspondence is hardly to be expected, since the independence condition holds only very approximately. A similar calculation with Swedish data /20/ gives apparently very bad results, although the regression of income on wealth is linear. To take an example: For married couples, both taxed, in 1971, the re gression coefficient of income on wealth is 0,49, the Pareto coeffi cient for/income ought thus to be 3,4, but it is in reality 2,5. The explanation is that the standard deviation of income increases with wealth (from 0,3 to 0,4 in the highest wealth class). This produced a thinning out of the tail of the income distribution, thus leading to a smaller Pareto coefficient than would otherwise obtain. The effect of increasing standard deviation is actually the same as that of a steepening of the regression line of income on wealth. /- C'V / /?s. ? W L'- 1 y-<J-