ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)

The Econophysics of Labor Income

Nikolaos Papanikolaou

Correspondence: Nikolaos Papanikolaou, nikolaos.papanikolaou@lehman.cuny.edu

Lehman College, Bronx, New York, USA

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Abstract

This paper examines the Census Bureau’s Current Population Survey (CPS) of full-time wage and salary workers to determine the underlying functional form of the size distribution of income from 1996 to 2008. There has been a lot of attention on income inequality Pre and Post Great Recession of 2008-2009. This paper applies the tools developed in a new field of economics called Econophysics. The analysis uses parametric and nonparametric methods to determine the size distribution of wage and salary income. The findings suggest that the underlying functional form of labor income is approximately distributed as an exponential distribution, while non-labor income is underscored by a Pareto distribution.

Keywords:

  Size Distribution of Labor Income, Income Inequality, Boltzmann-Gibbs Distribution, Optimal Bandwidth, Kernel Density Estimator, Census Bureau, Exponential Distribution, Pareto Distribution.


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