This article analyses the upper tails of wealth, income and consumption in India over the period 2012–2018 using rich lists, wealth surveys, income tax returns and consumer expenditure surveys. We find the upper tail to obey a power-law in all three economic resources. Comparing our estimates in 2012—where we possess data on wealth, income and consumption simultaneously—we find that the upper tail of wealth is most concentrated, income slightly less, and consumption is much less concentrated. Unlike wealth and income, the Pareto coefficients for consumption are estimated to have a well-defined mean and variance. Our findings are suggestive of convex saving functions in the income distribution.
BanajiJ. (2022). Indian big business: The evolution of India’s corporate sector from 2000 to 2020. Phenomenal World: Jain Family Institute. https://www.phenomenalworld.org/analysis/family-business/
2.
BourguignonF. (1981). Pareto superiority of unegalitarian equilibria in Stiglitz’ model of wealth distribution with convex saving function. Econometrica: Journal of the Econometric Society, 49(6), 1469–1475.
3.
BrzezinskiM. (2014). Do wealth distributions follow power laws? Evidence from ‘rich lists’. Physica A: Statistical Mechanics and its Applications, 406(C), 155–162.
4.
CastaldiC., & MilakovićM. (2007). Turnover activity in wealth portfolios. Journal of Economic Behavior & Organization, 63(3), 537–552.
5.
ClausetA., ShaliziC. R., & NewmanM. E. (2009). Power-law distributions in empirical data. SIAM Review, 51(4), 661–703.
6.
DaviesJ. B., & ShorrocksA. F. (2000). The distribution of wealth. Handbook of income distribution (Vol. 1, pp. 605–675). Elsevier.
7.
DragulescuA., & YakovenkoV. M. (2001). Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States. Physica A: Statistical Mechanics and its Applications, 299(1–2), 213–221.
8.
GabaixX. (2009). Power laws in economics and finance. Annual Review of Economics, 1, 255–294.
9.
GabaixX. (2016). Power laws in economics: An introduction. Journal of Economic Perspectives, 30(1), 185–206.
10.
GabaixX., & IbragimovR. (2011). Rank — 1/2: A simple way to improve the OLS estimation of tail exponents. Journal of Business & Economic Statistics, 29(1), 24–39.
11.
JayadevA. (2008). A power law tail in India’s wealth distribution: Evidence from survey data. Physica A: Statistical Mechanics and its Applications, 387(1), 270–276.
12.
KlassO. S., BihamO., LevyM., MalcaiO., & SolomonS. (2006). The Forbes 400 and the Pareto wealth distribution. Economics Letters, 90(2), 290–295.
13.
OgwangT. (2013). Is the wealth of the world’s billionaires Paretian?Physica A: Statistical Mechanics and its Applications, 392(4), 757–762.
14.
ShaikhA. (2017). Income distribution, econophysics and Piketty. Review of Political Economy, 29(1), 18–29.
15.
SinhaS. (2006). Evidence for power-law tail of the wealth distribution in India. Physica A: Statistical Mechanics and its Applications, 359(C), 555–562.
16.
StiglitzJ. E. (1969). Distribution of income and wealth among individuals. Econometrica: Journal of the Econometric Society, 37(3), 382–397.
17.
TaoY., WuX., ZhouT., YanW., HuangY., YuH., MondalB., & YakovenkoV. M. (2019). Exponential structure of income inequality: Evidence from 67 countries. Journal of Economic Interaction and Coordination, 14, 345–376. https://doi.org/10.1007/s11403-017-0211-6
18.
VermeulenP. (2018). How fat is the top tail of the wealth distribution?Review of Income and Wealth, 64(2), 357–387.
19.
YakovenkoV. M., & SilvaA. C. (2005). Two-class structure of income distribution in the USA: Exponential bulk and power-law tail. In ChatterjeeA., YarlagaddaS. & ChakrabartiB. K. (Eds.), Econophysics of Wealth Distributions (pp. 15–23). Springer.
