Growth and Fluctuations of Personal Income

Pareto's law states that the distribution of personal income obeys a power-law in the high-income range, and has been supported by international observations. Researchers have proposed models over a century since its discovery. However, the dynamical nature of personal income has been little studied hitherto, mostly due to the lack of empirical work. Here we report the first such study, an examination of the fluctuations in personal income of about 80,000 high-income taxpayers in Japan for two consecutive years, 1997 and 1998, when the economy was relatively stable. We find that the distribution of the growth rate in one year is independent of income in the previous year. This fact, combined with an approximate time-reversal symmetry, leads to the Pareto law, thereby explaining it as a consequence of a stable economy. We also derive a scaling relation between positive and negative growth rates, and show good agreement with the data. These findings provide the direct observation of the dynamical process of personal income flow not yet studied as much as for companies.Comment: 9 pages, 4 figure

On Stable Pareto Laws in a Hierarchical Model of Economy

This study considers a model of the income distribution of agents whose pairwise interaction is asymmetric and price-invariant. Asymmetric transactions are typical for chain-trading groups who arrange their business such that commodities move from senior to junior partners and money moves in the opposite direction. The price-invariance of transactions means that the probability of a pairwise interaction is a function of the ratio of incomes, which is independent of the price scale or absolute income level. These two features characterize the hierarchical model. The income distribution in this class of models is a well-defined double-Pareto function, which possesses Pareto tails for the upper and lower incomes. For gross and net upper incomes, the model predicts definite values of the Pareto exponents, $a_{\rm gross}$ and $a_{\rm net}$, which are stable with respect to quantitative variation of the pair-interaction. The Pareto exponents are also stable with respect to the choice of a demand function within two classes of status-dependent behavior of agents: linear demand ($a_{\rm gross}=1$, $a_{\rm net}=2$) and unlimited slowly varying demand ($a_{\rm gross}=a_{\rm net}=1$). For the sigmoidal demand that describes limited returns, $a_{\rm gross}=a_{\rm net}=1+\alpha$, with some $\alpha>0$ satisfying a transcendental equation. The low-income distribution may be singular or vanishing in the neighborhood of the minimal income; in any case, it is $L_1$-integrable and its Pareto exponent is given explicitly. The theory used in the present study is based on a simple balance equation and new results from multiplicative Markov chains and exponential moments of random geometric progressions.Comment: 23 pages, 10 figure

Power-law distributions from additive preferential redistributions

We introduce a non-growth model that generates the power-law distribution with the Zipf exponent. There are N elements, each of which is characterized by a quantity, and at each time step these quantities are redistributed through binary random interactions with a simple additive preferential rule, while the sum of quantities is conserved. The situation described by this model is similar to those of closed $N$-particle systems when conservative two-body collisions are only allowed. We obtain stationary distributions of these quantities both analytically and numerically while varying parameters of the model, and find that the model exhibits the scaling behavior for some parameter ranges. Unlike well-known growth models, this alternative mechanism generates the power-law distribution when the growth is not expected and the dynamics of the system is based on interactions between elements. This model can be applied to some examples such as personal wealths, city sizes, and the generation of scale-free networks when only rewiring is allowed.Comment: 12 pages, 4 figures; Changed some expressions and notations; Added more explanations and changed the order of presentation in Sec.III while results are the sam

Large Alphabets and Incompressibility

We briefly survey some concepts related to empirical entropy -- normal numbers, de Bruijn sequences and Markov processes -- and investigate how well it approximates Kolmogorov complexity. Our results suggest $\ell$th-order empirical entropy stops being a reasonable complexity metric for almost all strings of length $m$ over alphabets of size $n$ about when $n^\ell$ surpasses $m$

The Economic Mobility in Money Transfer

In this paper, we investigate the economic mobility in some money transfer models which have been applied into the research on wealth distribution. We demonstrate the mobility by recording the time series of agents' ranks and observing their volatility. We also compare the mobility quantitatively by employing an index, "the per capita aggregate change in log-income", raised by economists. Like the shape of distribution, the character of mobility is also decided by the trading rule in these transfer models. It is worth noting that even though different models have the same type of distribution, their mobility characters may be quite different.Comment: 17 pages, 4 figures, 2nd versio

Power Law Distribution of Wealth in a Money-Based Model

A money-based model for the power law distribution (PLD) of wealth in an economically interacting population is introduced. The basic feature of our model is concentrating on the capital movements and avoiding the complexity of micro behaviors of individuals. It is proposed as an extension of the Equiluz and Zimmermann's (EZ) model for crowding and information transmission in financial markets. Still, we must emphasize that in EZ model the PLD without exponential correction is obtained only for a particular parameter, while our pattern will give it within a wide range. The Zipf exponent depends on the parameters in a nontrivial way and is exactly calculated in this paper.Comment: 5 pages and 4 figure

Asymptotic analysis of the model for distribution of high-tax payers

The z-transform technique is used to investigate the model for distribution of high-tax payers, which is proposed by two of the authors (K. Y and S. M) and others. Our analysis shows an asymptotic power-law of this model with the exponent -5/2 when a total ``mass'' has a certain critical value. Below the critical value, the system exhibits an ordinary critical behavior, and scaling relations hold. Above the threshold, numerical simulations show that a power-law distribution coexists with a huge ``monopolized'' member. It is argued that these behaviors are observed universally in conserved aggregation processes, by analizing an extended model.Comment: 5pages, 3figure

Typical properties of optimal growth in the Von Neumann expanding model for large random economies

We calculate the optimal solutions of the fully heterogeneous Von Neumann expansion problem with $N$ processes and $P$ goods in the limit $N\to\infty$. This model provides an elementary description of the growth of a production economy in the long run. The system turns from a contracting to an expanding phase as $N$ increases beyond $P$. The solution is characterized by a universal behavior, independent of the parameters of the disorder statistics. Associating technological innovation to an increase of $N$, we find that while such an increase has a large positive impact on long term growth when $N\ll P$, its effect on technologically advanced economies ($N\gg P$) is very weak.Comment: 8 pages, 1 figur

Killing-Yano tensors and some applications

The role of Killing and Killing-Yano tensors for studying the geodesic motion of the particle and the superparticle in a curved background is reviewed. Additionally the Papadopoulos list [74] for Killing-Yano tensors in G structures is reproduced by studying the torsion types these structures admit. The Papadopoulos list deals with groups G appearing in the Berger classification, and we enlarge the list by considering additional G structures which are not of the Berger type. Possible applications of these results in the study of supersymmetric particle actions and in the AdS/CFT correspondence are outlined.Comment: 36 pages, no figure

Directional mobility of debt ratings

In this paper we describe a method to decompose a well-known measure of debt ratings mobility into it's directional components. We show, using sovereign debt ratings as an example, that this directional decomposition allows us to better understand the underlying characteristics of debt ratings migration and, for the case of the data set used, that the standard Markov chain model is not homogeneous in either the time or cross-sectional dimensions. We find that the directional decomposition also allows us to sign the change in quality of debt over time and across sub-groups of the population