[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/arx/papers/0905.3803.html
   My bibliography  Save this paper

Income and Poverty in a Developing Economy

Author

Listed:
  • Amit K Chattopadhyay
  • Graeme J Ackland
  • Sushanta K Mallick
Abstract
We present a stochastic agent-based model for the distribution of personal incomes in a developing economy. We start with the assumption that incomes are determined both by individual labour and by stochastic effects of trading and investment. The income from personal effort alone is distributed about a mean, while the income from trade, which may be positive or negative, is proportional to the trader's income. These assumptions lead to a Langevin model with multiplicative noise, from which we derive a Fokker-Planck (FP) equation for the income probability density function (IPDF) and its variation in time. We find that high earners have a power-law income distribution while the low income groups have a Levy IPDF. Comparing our analysis with the Indian survey data (obtained from the world bank website) taken over many years we obtain a near-perfect data collapse onto our model's equilibrium IPDF. The theory quantifies the economic notion of "given other things". Using survey data to relate the IPDF to actual food consumption we define a poverty index, which is consistent with traditional indices, but independent of an arbitrarily chosen "poverty line" and therefore less susceptible to manipulation.

Suggested Citation

  • Amit K Chattopadhyay & Graeme J Ackland & Sushanta K Mallick, 2009. "Income and Poverty in a Developing Economy," Papers 0905.3803, arXiv.org.
    • Handle: RePEc:arx:papers:0905.3803
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/0905.3803
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:0905.3803. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.