Measuring Inequality: Pareto's Ambiguous Contribution

Abstract

Pareto's contribution to the theory and statistics of income has been universally recognized as a decisive step in the study of the personal distribution of income and wealth, perhaps even as the fi rst contribution in applied econometrics. His "income law" is certainly not as universal as he thought; however, it has been shown to be a heuristic instrument of undoubted cognitive potential, which is furthermore effi cient and still valid for describing the upper tail of the distribution of wealth. On the other hand, Pareto's concept of inequality has remained in a sort of shadow zone, and particularly so the index that he had proposed for measuring it. 1 There is a double reason for this: fi rst, the index α identifi ed by Pareto had no universal value, being applicable only to the strictly "Paretian" distributions; 2 second, and paradoxically, the interpretation of

Wealth Inequality: A Survey

“…The upper tail of income and wealth distributions are commonly described by the Pareto Type I (or ‘power law') distribution (Arnold, ; Maccabelli, ). The key characteristic of the distribution introduced by Pareto () is the linear relationship between the logarithm of the proportion of individuals with wealth greater than w and the logarithm of w itself.…”

The impact of income on airfare pricing

“…Maccabelli (2009) argues that is a shape index measuring the level of average income and wealth inequality (a lower value of measures a more uneven distribution of income and a higher mean wealth). 6 For a derivation of this relationship, see Takayasu (1990), Levy and Solomon (1997) and Levy (2006).…”

Parametric representation of the top of income distributions: Options, historical evidence, and model selection

“…To model multiple distribution characteristics, additional shape parameters are needed. Over the 20th century, alternative distribution functions have been proposed as providing a closer fit to the shape of income distributions, or more flexibility across different national distributions (Maccabelli, 2009; Persky, 1992).…”