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Title: Memoryless Property of the Income Distribution as an Indication for Testing the Equality of Opportunity: Evidence from China (1978-2015)

Citation Type: Miscellaneous

Publication Year: 2023

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ISSN:

DOI: 10.20944/PREPRINTS202303.0279.V1

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Abstract: It has been well known that the exponential distribution is the only continuous distribution that has the memoryless property. Here, we observe that, if the exponential distribution dominates an economy as a probability distribution of income acquisition, then the memoryless property imposes equal opportunities on agents in this economy to acquire earnings. Based on this observation, we propose to identify the emergence of an exponential income distribution as a potential necessary condition for guaranteeing the equality of opportunity. Together with other conditions (such as social and economic mobility), it would promote equal opportunities for income acquisition among citizens. Empirically, we employ the latest data available from four representative market-economy countries (the United Kingdom, the United States, Canada, and China) to demonstrate that the exponential distribution is a stylized feature of the income structure of the low- and middle-income class, which occupies the great majority of populations. By contrast, the top income classes in these countries obey the Pareto distribution. To validate the relationship between exponential distribution and equal opportunity, we empirically show how the income structure of the low- and middle-income class in China (from 1978 to 2015) evolved towards an exponential distribution after the market-oriented economic reformation.

Url: https://www.preprints.org/manuscript/202303.0279/v1

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Authors: Tao, Yong

Publisher: Preprints.org

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

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