Abstract
An analysis of the dynamic behaviour of earnings distributions is conducted here in three ways. First, the method of dimensional analysis, in the context of Buckingham's Pi theorem, is employed to demonstrate that earnings distributions, which are almost always dynamic in character, should, under certain conditions and a special coordinate transformation, be self-similar and time-invariant. Application of the theorem to some empirical data, pertaining to Canadian income, fully confirms this finding. Second, an economics-based model, incorporating the concept of a shock-free economy in competitive equilibrium, is developed to provide an intuitive account of the conclusions reached above. Testing the model's predictions against data once again yields satisfactory agreement between the two. The model is finally extended to account for labour-force mobility across income brackets. The outcome of this, when compared with empirical data, could reflect the degree of homogeneity, and even discrimination, in a labour force.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.