In reality, profits in excess of 1oo % may exist. In
the caoe where k <1 we can,however, always ensure
that the conditions are net and (4) remains applicable
As before, we rotate the diagonal round a poii
it is parallel to the regression line (see fig.
and along that line the distribution is truncated. If
46*ft
we choose the point appropriately, we can reduce the
number of incomes truncated. In algebraic terms, we
define W* » Vi^W©t and we tfrite (4) in the following
form:
y\/o
W t
V
q (I) - cdX
j* (kWM4-/ 0 -Y) if*®*' d¥ '
p) exp -F f (Y4$(o)J ,
(5)
kV'> &Wfl\
hU / ^>(y f-wWe]
The resulting income distribution differs only by a
constant factor from (4). Since the transformation (5),
however, is only applicable to wealth not smaller than
V 0 , it can be intuitively seen that the income distrib
ution will start only at the level Y « V 0 to cbnfftrm to
the Pareto Law. In other words, the Pareto law will
always be projected from wealth on to income, but\de-
peading on the shape of the regression line, the ih^come
distribution will confirm to linearity only from a mbre