Abstract
There are empirical evidences regrading the Pareto tail of the income distribution and the expenditure distribution. We formulate a simple economic framework to study the relation between them. We explain the Pareto tails in both the distributions with a Cobb-Douglas felicity function to describe the preferences of agents. Moreover, the Indian data suggest a thicker Pareto tail for the expenditure distribution in comparison to the income distribution. With a uniform distribution of taste parameters for various goods, we identify a process that can give rise to this empirical phenomenon. We also verify our observation with appropriate simulation results.
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Gangopadhyay, K., Basu, B. (2011). Income and Expenditure Distribution. A Comparative Analysis. In: Abergel, F., Chakrabarti, B.K., Chakraborti, A., Mitra, M. (eds) Econophysics of Order-driven Markets. New Economic Windows. Springer, Milano. https://doi.org/10.1007/978-88-470-1766-5_18
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DOI: https://doi.org/10.1007/978-88-470-1766-5_18
Publisher Name: Springer, Milano
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