Revisiting the thermal and superthermal two-class distribution of incomes

What is it about?

Econophysicists have made an intriguing claim about the structure of the distribution of income. I point to both the importance of this finding and some weaknesses in the early work. E.g., explanations centered on an underlying conservation law are not very plausible economically, but they are also unnecessary. I show that while the original claim about a thermal/superthermal distribution remains relevant, there is evidence of an additional mixture component to be explained. There also is a relevant economic theory, of labor market segmentation, that may help explain the results.

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Why is it important?

I hope that the paper helps identify possible weaknesses in the original contributions to be addressed in future work and new avenues for further exploration. The information theoretic approach to the empirical question of what fits also provides a more robust method for identifying the correct mixture.

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