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Empirical Economics

, Volume 41, Issue 2, pp 473–486 | Cite as

Power laws in top wealth distributions: evidence from Canada

  • Tomson OgwangEmail author
Original Paper

Abstract

This article investigates Pareto power law (PPL) behavior at the top of the Canadian wealth distribution. To this end, Canadian Business data on the wealthiest 100 Canadians for the years 1999–2008 are used. The resulting estimates of the PPL exponent ranged from approximately 1.0 to 1.3 depending on the year of analysis and the estimation method used. These estimates are roughly comparable to those based on Forbes’ list of the wealthiest 400 Americans. Furthermore, whereas modified OLS and maximum likelihood estimates of the power law exponents conform to Zipf’s law, the OLS estimates do not. These results raise some concerns about deducing the magnitudes of and trends in the power law exponents based on a single estimation method and highlight the importance of extensive hypothesis testing for model adequacy. The battery of diagnostic tests pertaining to PPL behavior at the top of the Canadian wealth distribution yields some conflicting results.

Keywords

Pareto power law Zipf’s law Wealth Inequality 

JEL Classification

C46 D31 

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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.Department of EconomicsBrock UniversitySt. CatharinesCanada

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