Full text: The Personal Distribution of Income

Larger wealth presupposes larger income ( if it had to he saved 
out of it) } t erefore the mean income has t> be higher for 
lar er wealth. Prom thid point of view it is not surprising 
that the increase of income with wealth is less than proportionate, 
because wealth in an integral f income taken ver time ^ 
if saving can be assumed t be a cinstant proportion of inc me. 
The interpretation is only weakened to the extent to which it 
could be argued that the creation of new wealth from earned 
Inc me will affect mostly the lower wealth classes ( only 
earned inc me i3 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 ereation 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 st eply ( 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 f return relation ). 
n f[ 
Thus the #tw> relatione or theories >r laws 
behind the j->int distribution of wealth and inc me seem 
to be both relevant for each of the two regression lines 
although possibly not to the same extent ( each f the 
regressi n lines may be be more strongly influenced by 
one relation than by the other ). 
The preceding arguments implied that.to^ s me exeat, 
each regression line is an inverse t the other regression line. 
In order to make this clear let me choose an example fr m 
another field/ where there is only one "law" or at least we 
can pretend there is only one. 'fake 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. 
We expect the other regression to be the inverse of the first

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