Summary
This paper examines a stochastic multiplicative process with reset event to explain the power law in the tail of personal income distribution. The tail part of the income distributions in post-war Japan persistently exhibits a power-law distribution with an exponent around 2. We find that a multiplicative process with reset events can explain this pattern. By using a default rate of corporate fundings as a hazard rate of the reset event, we obtain the correct exponent for the power-law in Japanese income.
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© 2004 Springer-Verlag Berlin Heidelberg
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Nirei, M., Souma, W. (2004). Income Distribution and Stochastic Multiplicative Process with Reset Event. In: Gallegati, M., Kirman, A.P., Marsili, M. (eds) The Complex Dynamics of Economic Interaction. Lecture Notes in Economics and Mathematical Systems, vol 531. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17045-4_9
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DOI: https://doi.org/10.1007/978-3-642-17045-4_9
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-40497-2
Online ISBN: 978-3-642-17045-4
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