Full text: Konvolut The Personal Distribution of Income 1

income. In other words, the mean wealth in low income classes, 
as measured by the data^rhioh we have on the basis of tax assessments 
very strongly overstates the real mean wealth, and this the more 
the lower the income. 
There is no proof, of course, that some curvilinearity 
would not remain even if full wealth data were available. There 
may even be theoretical reasons for that, as will be shown later. 
One reason for linearity of the presumed full data should be 
mentioned: It is rather queer that non-linearity affects onjy 
one of the regression lines and the other is perfectly linear. 
Only the truncation of wealth data gives a pl a usible explanation 
of this contrast between the *wp regression lines. 
3mpirical data: Holland and Sweden. 
The cross-classificaiion of wealth and income, available 
for the Netherlands and Sweden, will now be discussed in/the light 
of the theory contained in equation £5") • "Verification" aan 
hardly be expected: The rate of return explanation can not nearly 
explain the income of property owners fully, since a large part of 
it is earned income. Apart from other statistical difficulties 
it must be kent in mind that the ?ar*to coefficient is always 
more or less arbitrary, since it depends on the range of income 
or wealth classes included when you measure it. 3ven inconclusive 
data, however, are better than speculating in the void. 
An evidence on which I rely heavily is the linear and 
fairly regular character of the regression of mean income on wealth 
( fig 1). The regression coefficient is in most cases around 2/3. 
but it hay be as low as l/2 . Whether the higher moments of income 
are independent of wealth is not easy to decide. While the 
variance, in the Swedish data, increases in the higher wealth classes 
this can plausibly be explained by the increase .in the range of 
these classes ( the last but one wealth class has a range aboht 
four times as great as the lower wealth blasses). The same 
fact is relevant for the comparison of the conditional distribution 
of income in the various wealth classes: They all have a ^areto tail, 
the ^arfcto coefficient being markedly lower in.the last two or three' 
wealth classes chan in the other s. This, again, may be 
plausibly explained by the greater range of these high wealth 
size classes.

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