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Hierarchy and the Power-Law Income Distribution Tail

Author

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  • Fix, Blair

    (York University)

Abstract

What explains the power-law distribution of top incomes? This paper tests the hypothesis that it is firm hierarchy that creates the power-law income distribution tail. Using the available case-study evidence on firm hierarchy, I create the first large-scale simulation of the hierarchical structure of the US private sector. Although not tuned to do so, this model reproduces the power-law scaling of top US incomes. I show that this is purely an effect of firm hierarchy. This raises the possibility that the ubiquity of power-law income distribution tails is due to the ubiquity of hierarchical organization in human societies.

Suggested Citation

  • Fix, Blair, 2018. "Hierarchy and the Power-Law Income Distribution Tail," OSF Preprints u95dk, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:u95dk
    DOI: 10.31219/osf.io/u95dk
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    References listed on IDEAS

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    1. Fredrik Heyman, 2005. "Pay inequality and firm performance: evidence from matched employer-employee data," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1313-1327.
    2. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1993. "Hierarchies and compensation: A case study," European Economic Review, Elsevier, vol. 37(2-3), pages 366-378, April.
    3. Treble, John & van Gameren, Edwin & Bridges, Sarah & Barmby, Tim, 2001. "The internal economics of the firm: further evidence from personnel data," Labour Economics, Elsevier, vol. 8(5), pages 531-552, December.
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    Cited by:

    1. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," Working Papers on Capital as Power 2020/01, Capital As Power - Toward a New Cosmology of Capitalism.
    2. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," SocArXiv g86am, Center for Open Science.
    3. Blair Fix, 2022. "Economic development and the death of the free market," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 1-46, April.
    4. Fix, Blair, 2019. "How the Rich Are Different: Hierarchical Power as the Basis of Income Size and Class," SocArXiv t8muy, Center for Open Science.
    5. Fix, Blair, 2021. "Redistributing Income Through Hierarchy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 98, pages 58-86.
    6. Blair Fix, 2019. "Energy, hierarchy and the origin of inequality," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-32, April.
    7. Blair Fix, 2021. "How the rich are different: hierarchical power as the basis of income size and class," Journal of Computational Social Science, Springer, vol. 4(2), pages 403-454, November.
    8. Fix, Blair, 2018. "The Growth of US Top Income Inequality: A Hierarchical Redistribution Hypothesis," SocArXiv suqnk, Center for Open Science.
    9. Fix, Blair, 2019. "How the rich are different: Hierarchical power as the basis of income size and class," Working Papers on Capital as Power 2019/02 (v.2), Capital As Power - Toward a New Cosmology of Capitalism.
    10. Fix, Blair, 2021. "The Rise of Human Capital Theory," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 95, pages 29-41.
    11. Fix, Blair, 2019. "Energy, Hierarchy and the Origin of Inequality," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 14(4, April), pages 1-32.

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    1. Fix, Blair, 2017. "Evidence for a Power Theory of Personal Income Distribution," Working Papers on Capital as Power 2017/03, Capital As Power - Toward a New Cosmology of Capitalism.
    2. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," SocArXiv g86am, Center for Open Science.
    3. Fix, Blair, 2018. "Hierarchy and the Power-Law Income Distribution Tail," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue OnlineFir, pages 1-21.
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    9. Blair Fix, 2022. "Economic development and the death of the free market," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 1-46, April.
    10. Fix, Blair, 2021. "Living the Good Life in a Non-Growth World. Investigating the Role of Hierarchy," Working Papers on Capital as Power 2021/02, Capital As Power - Toward a New Cosmology of Capitalism.
    11. Fix, Blair, 2018. "Capitalist Income and Hierarchical Power," SocArXiv u8epv, Center for Open Science.
    12. Fix, Blair, 2018. "The Growth of US Top Income Inequality: A Hierarchical Redistribution Hypothesis," SocArXiv suqnk, Center for Open Science.
    13. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," Working Papers on Capital as Power 2020/01, Capital As Power - Toward a New Cosmology of Capitalism.
    14. Fix, Blair, 2019. "Personal Income and Hierarchical Power," SocArXiv pb475, Center for Open Science.
    15. Fix, Blair, 2017. "Evidence for a Power Theory of Personal Income Distribution," SocArXiv qgwus, Center for Open Science.
    16. Christian Grund & Niels Westergaard-Nielsen, 2008. "The Dispersion of Employees' Wage Increases and Firm Performance," ILR Review, Cornell University, ILR School, vol. 61(4), pages 485-501, July.
    17. Blair Fix, 2019. "Energy, hierarchy and the origin of inequality," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-32, April.
    18. Grund, Christian, 2002. "The Wage Policy of Firms: Comparative Evidence for the U.S. and Germany from Personnel Data," Bonn Econ Discussion Papers 30/2002, University of Bonn, Bonn Graduate School of Economics (BGSE).
    19. Fix, Blair, 2018. "The Trouble With Human Capital Theory," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 86, pages 15-32.
    20. Fix, Blair, 2019. "How the Rich Are Different: Hierarchical Power as the Basis of Income Size and Class," SocArXiv t8muy, Center for Open Science.

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