Full text: Konvolut Wealth and Income Distribution 1

is 0,626 + 0,004 (data for 1962/63). The regression coefficient 
corresponds to our k. That kO 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.

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