ABSTRACT
What explains the power-law distribution of top incomes? This paper tests the hypothesis that it is firm hierarchy that creates the power-law income distribution tail. Using the available case-study evidence on firm hierarchy, I create the first large-scale simulation of the hierarchical structure of the US private sector. Although not tuned to do so, this model reproduces the power-law scaling of top US incomes. I show that this is purely an effect of firm hierarchy. This raises the possibility that the ubiquity of power-law income distribution tails is due to the ubiquity of hierarchical organization in human societies.

DOI: https://doi.org/10.1007/s42001-018-0019-8

Citation
Hierarchy and the power‑law income distribution tail
Fix, Blair. (2018). Journal of Computational Social Science. Vol. 1. No. 2. July. pp. 471-491.

Download PDF