12
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.
