A New Model Of Income Distribution: The Pareto-Lognormal Distribution

Abstract

To describe the distributions of personal income, many models have been suggested as alternatives to the Pareto distribution. This paper is not intended to review the whole literature about such a subject and to recall the trends which have promoted the research about the above-mentioned models. This kind of work has already been done by C. Dagum (1980) and other authors. Herein it will be pointed out that the type I Pareto distribution has always been an unquestionable reference point and even if such a distribution is not up to describe the left tail of an income distribution, the right tail of an income distribution usually follows the Pareto law. This point of view has been exploited by Dagum (1980) by defining the Pareto weak law. By this author a model of income distribution must obey the Pareto weak law, that is the retrocumulative distribution S(x) must behave like (x/x₀)^-a when x diverges (a and X₀ are conveniently chosen constants).