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10 Cot (w, w-y ) ■ Var (w) - Cot ( w,y) - 0; Cot (w.y ) ä 1 Var (w) If the regression line of income on wealth is 7 - K* + 7o ( ) and^i! if the Tariance and higher moments of the conditional income distribution are independent of wealth then we should use instead of f(w-y) the function f (>£w+ y c - y ) and this distribution will be independent of wealth. 7e can then proceed as before: q(y) ‘a? f( *Cw + j c - y ) e" *** dw = for ^w,> y 7c q(y) = 0 for kw < y -y e . The result is now that the Pareto shape of the wealth distribution is reproduced in. the income distribution, but with a larger Pareto coefficient ( since K’-O )• -his is exactly what has to be explained ( income distributions are in fact more "equal" than the wealth distributions, empirically, in the sense described ). The particular shape of the rate of return distribution has no influence onthe tail of the income distribution, as long as it fulfills the independence conditions mentioned. Concerning the restriction w^> y - y c it should be remarked that we are free to shift the coordinate system to any y c we choose so as to make the above condition Talid, with no consequence except that the conclusion about the Pareto tail will be_confined to incomes in excess of y c . It would seem that in practice, in Tiew of the value of , y ö must often be more or less high, so that the Parto pattern will be confined to a rather narrow range of the income distribution while in the caseof wealth it usually extends to the whole of the assessed wealth data. -This, it is true, partly results from the fact that the wealth data are more truncated than the income data, in Tiew of the underlying tax laws.