arXiv subjects

Ivan O. Kitov

Publications and source records attributed to Ivan O. Kitov.

21 records · Page 2Linked to original sources

arXiv2008

Evolution of the personal income distribution in the USA: High incomes

The personal income distribution (PID) above the Pareto threshold is studied and modeled. A microeconomic model is proposed to simulate the PID and its evolution below and above the Pareto income threshold. The model balances processes of income production and dissipation for any person above 15 years of age. The model accurately predicts the observed dependence of the number of people reaching the Pareto threshold on work experience and the functional dependence of the relationship on the per capita real GDP growth for the period from 1994 to 2002. Predictions of the income distribution depending on age are given for past and future. In future, relatively less rich people are observed in the younger age groups and the peak of the relative number shifts to older ages with time. The effect of the power law distribution extending itself to very high incomes is speculated to be the cause of low performance of socialist countries.

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arXiv2008

Modeling the evolution of Gini coefficient for personal incomes in the USA between 1947 and 2005

The evolution of Gini coefficient for personal incomes in the USA between 1947 and 2005 is analyzed and modeled. There are several versions of personal income distribution (PID) provided by the US Census Bureau (US CB) for this period with various levels of resolution. Effectively, these PIDs result in different Gini coefficients due to the differences between discrete and continuous representations. When all persons of 15 years of age and over are included in the PIDs, Gini coefficient drops from 0.64 in 1947 to 0.54 in 1990. This effect is observed due to a significant decrease in the portion of people without income. For the PIDs not including persons without income, Gini coefficient is varying around 0.51 between 1960 and 2005 with standard deviation of 0.004, i.e. is in fact constant. This Gini coefficient is practically independent on the portion of population included in the PIDs according to any revision of income definitions. The driving force of the model describing the evolution of individual incomes (microeconomic level) and their aggregate value (macroeconomic level) is the change in nominal GDP per capita. The model accurately predicts the evolution of Gini coefficient for the PIDs for people with income. The model gives practically unchanged (normalized) PIDs and Gini coefficient between 1947 and 2005. The empirical Gini curves converge to the predicted one when the number of people without income decreases. Asymptotically, the empirical curves should collapse to the theoretical one when all the working age population obtains an appropriate definition of income. Therefore the model Gini coefficient potentially better describes true behavior of inequality in the USA because the definitions of income used by the US Census Bureau apparently fail to describe true income distribution.

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arXiv2008

Exact prediction of S&P 500 returns

A linear link between S&P 500 return and the change rate of the number of nine-year-olds in the USA has been found. The return is represented by a sum of monthly returns during previous twelve months. The change rate of the specific age population is represented by moving averages. The period between January 1990 and December 2003 is described by monthly population intercensal estimates as provided by the US Census Bureau. Four years before 1990 are described using the estimates of the number of 17 year-olds shifted 8 years back. The prediction of S&P 500 returns for the months after 2003, including those beyond 2007, are obtained using the number of 3 year-olds between 1990 and 2003 shifted by 6 years ahead and quarterly estimates of real GDP per capita. A prediction is available for the period beyond 2007. There are two sharp drops in the predicted returns - in 2007 and 2009, and one strong rally in 2008. Equivalently, S&P 500 index should drop in 2007 and 2009 to the level observed one year before. Potential link between S&P 500 returns and 9-year-old population is tested for cointegration. The Engle-Granger and Johansen tests demonstrate the presence of a long-term equilibrium (cointegrating) relation between these variables. This makes valid standard statistical estimates. Correlation between the predicted and observed indices, including RMS difference, linear regression, and VAR demonstrate good prediction accuracy at two-year horizon, when the prediction uses 7-year-olds instead of 9-year-olds. The RMS difference between the observed and predicted returns for the period between 1992 and 2003 is only 0.09 with standard deviation of the observed series for the same period of 0.12 and the naive (random walk) RMS deference of 0.18.

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