The Personal Distribution of Income

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: The Personal Distribution of Income

Author:: Steindl, Josef

Scope:: Kopie eines Typoskripts mit handschriftlichen Anmerkungen, insgesamt 27 Seiten mit originalen handschriftlichen Anmerkungen auf Seite 23 (nummeriert als Seite 18)

Year of publication:: 1972

Source material date:: August-September 1972

Language:: English

Related work:: Steindl, Josef: The Personal Distribution of Income. In: Steindl, Josef: Economic Papers 1941-88. London: Macmillan, 1990, S. 356-371

Topic:: Stochastic processes and size distribution

Shelfmark:: S/M.52.9

Access:: Free access

17 Larger wealth presupposes larger income ( if it had to be saved, out of it)^ therefore the mean income has to be higher for larger wealth. From this point of view it is not surprising that the increase of income with wealth is less than proportionate, because wealth in an integral of income taken over time., if saving can be assumed to be a constant proportion of income. The interpretation is only weakened to the extent to which it could be argued that the creation of new wealth from earned income will affect mostly the lower wealth classes ( only earned income is really relevant in this context where income is supposed to play an active role vis-a-vis wealth ). The other regression - wealth on income - should on the face of it represent the effect of the propensity to save, the areation of new wealth from earned income ( continuing primary accumulation ). The curvilinear shape might be compatible with this interpretation, since for the lower incomes the saving will play no role and wealth will only start emerging when income has reached a certain level, and then it will rise steeply ( because it is an integral, see above ). Here again, an alternative interpretation is possible: If income is large, it- probably has been derived from large wealth, therefore to larger income will on the average correspond larger wealth ( rate of return relation ). •4 *4 Thus the ■ two relations or theories or laws behind the joint distribution of wealth and income seem to be both relevant for aach of the two regression lines, although possibly not to the same extent ( each of the regression lines may be be more strongly influenced by one relation than by the other ). The preceding arguments implied that,to.’ some exent, each regression line is an inverse to the other regression line. In order to make this clear let me choose an example from another field', where there is only one "law" or at least we can pretend there is only one. Take the size distribution of manufacturing plants according to output and cost. The law consists in the effects of scale on cost in relation to output. The regression of cost ( or employment) on output will show a coefficient less than one, decreasing cost to scale. 7/e exoect the other regression to be the inverse of the first 1 . /

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