Journal
JOURNAL OF POLITICAL ECONOMY
Volume 117, Issue 6, Pages 1140-1154Publisher
UNIV CHICAGO PRESS
DOI: 10.1086/648995
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Funding
- Economic and Social Research Council [RES-544-28-5001] Funding Source: researchfish
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Significant departures from log normality are observed in income data, in violation of Gibrat's law. We show empirically that the distribution of consumption expenditures across households is, within cohorts, closer to log normal than the distribution of income. We explain this empirical result by showing that the logic of Gibrat's law applies not to total income, but to permanent income and to marginal utility.
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