TY - JOUR
T1 - Investment talent and the Pareto wealth distribution
T2 - Theoretical and experimental analysis
AU - Levy, Moshe
AU - Levy, Haim
PY - 2003/8
Y1 - 2003/8
N2 - The empirically documented Pareto wealth distribution at high wealth levels implies rather extreme wealth inequality. Is this inequality primarily due to differential talent, or is it due to luck? The answer to this question has profound political, social, and philosophical implications, as well as implications regarding market efficiency. We address this question theoretically and with a unique investment experiment with equal initial endowments and real out-of-pocket money. We show that the empirically observed Pareto distribution implies that luck, rather than differential investment talent, is the main force driving inequality at high wealth levels.
AB - The empirically documented Pareto wealth distribution at high wealth levels implies rather extreme wealth inequality. Is this inequality primarily due to differential talent, or is it due to luck? The answer to this question has profound political, social, and philosophical implications, as well as implications regarding market efficiency. We address this question theoretically and with a unique investment experiment with equal initial endowments and real out-of-pocket money. We show that the empirically observed Pareto distribution implies that luck, rather than differential investment talent, is the main force driving inequality at high wealth levels.
UR - http://www.scopus.com/inward/record.url?scp=0242643036&partnerID=8YFLogxK
U2 - 10.1162/003465303322369830
DO - 10.1162/003465303322369830
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AN - SCOPUS:0242643036
SN - 0034-6535
VL - 85
SP - 709
EP - 725
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
IS - 3
ER -
