Is the distribution of income compatible with s stable distribution

Abstract

Mandelbrot (1961) proposed to apply the class of Pareto-Levy distributions - which belong to the\nStable distributions - as a framework for modelling income distributions. He also presented theoretic\narguments in favor of the Pareto-Levy distributions. In this paper we provide additional theoretical\njustification for this class of distributions. We also use micro data on individual market income to\nestimate the parameters of a Pareto-Levy distribution. Several estimation methods have been\napplied. The estimated Pareto-Levy distribution appears to fit the data well.