a regression coefficient k, then again the Pareto lav. 1 of
the wealth distribution will be reproduced in incone,
but this tine the Pareto coefficient will be modified to
<*/k.
If k is below unity - which we may anticipate, is in
reality the likely case - then the Pareto coefficient for
income will be larger than for wealth.
It is time now to turn to the restrictive assumptions which]
so far have been stated only in algebraic terms:
\Oy in the case of independence, kV^ Y in the case of
linear dependence.
,C,
This means that the rate of return must not be 100 j# or
t
larger in the first case; in the second case, if k<1,
■n-ijn [. i'j. ..7.Mi4-3A%T ftiri ;
wealth is defined as equal to zero for ¥<0; in con
sequence, the left tail of the function f* (W) (correspond
ing to negative values of W, thus to rates of return of
\
100 % and more) must also be defined as equal to zero (see
fig. 2). The function f* (W) relates to the case where
Hv s t'j i ) *
1