Mechanical Model of Personal Income Distribution

TL;DR

This paper introduces a mechanical microeconomic model that accurately predicts the shape and evolution of personal income distribution in the US, revealing stability in income inequality over decades.

Contribution

It presents a novel mechanics-inspired model for personal income distribution that resolves measurement issues and provides insights into income inequality trends.

Findings

PID shape has remained stable since 1947

Gini coefficient has been nearly constant for 60 years

Model accurately predicts income distribution evolution

Abstract

A microeconomic model is developed, which accurately predicts the shape of personal income distribution (PID) in the United States and the evolution of the shape over time. The underlying concept is borrowed from geo-mechanics and thus can be considered as mechanics of income distribution. The model allows the resolution of empirical and definitional problems associated with personal income measurements. It also serves as a firm fundament for definitions of income inequality as secondary derivatives from personal income distribution. It is found that in relative terms the PID in the US has not been changing since 1947. Effectively, the Gini coefficient has been almost constant during the last 60 years, as reported by the Census Bureau.