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An alternative method for modeling the size distribution of top wealth

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  • Wang, Yuanjun
  • You, Shibing

Abstract

The Pareto distribution has been widely applied in modeling the distribution of wealth, as well as top incomes, cities and firms. However, recent evidence has shown that the Pareto distribution is not consistent with many situations in which it was previously considered applicable. We propose an alternative method for estimating the upper tail distribution of wealth and suggest a new Lorenz curve for building models to provide such estimates. Applying our new models to the Forbes World’s Billionaire Lists, we show that they significantly outperform the Pareto Lorenz curve as well as some other popular alternatives.

Suggested Citation

  • Wang, Yuanjun & You, Shibing, 2016. "An alternative method for modeling the size distribution of top wealth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 457(C), pages 443-453.
    • Handle: RePEc:eee:phsmap:v:457:y:2016:i:c:p:443-453
    DOI: 10.1016/j.physa.2016.03.025
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    2. Lina M Cortés & Juan M Lozada & Javier Perote, 2021. "Firm size and economic concentration: An analysis from a lognormal expansion," PLOS ONE, Public Library of Science, vol. 16(7), pages 1-21, July.
    3. Tomaschitz, Roman, 2020. "Multiply broken power-law densities as survival functions: An alternative to Pareto and lognormal fits," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 541(C).

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