A variation of the Dragulescu-Yakovenko income model

TL;DR

This paper demonstrates that a two-parameter exponential distribution better models truncated income data in the Dragulescu-Yakovenko framework, improving upon the original one-parameter model.

Contribution

It introduces a modified exponential model with two parameters for more accurate income distribution modeling under data truncation.

Findings

Two-parameter exponential fits truncated income data well

One-parameter exponential is inadequate for truncated datasets

Modified model improves income distribution analysis

Abstract

In the context of the Dragulescu-Yakovenko (2000) model, we show that empirical income distribution with truncated datasets, cannot be properly modeled by the one-parameter exponential distribution. However, a truncated version characterized by an exponential distribution with two parameters gives an accurate fit.