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The Distribution of Income: A Saddle Point Formulation

Juhani Holm
The Scandinavian Journal of Economics
Vol. 93, No. 4 (Dec., 1991), pp. 545-554
Published by: Wiley on behalf of The Scandinavian Journal of Economics
DOI: 10.2307/3440228
Stable URL: http://www.jstor.org/stable/3440228
Page Count: 10
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The Distribution of Income: A Saddle Point Formulation
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Abstract

An income distribution, for which Shannon's information entropy becomes first-order stationary under given economic side conditions, has been shown to represent a minimum with a vanishing gradient vector and positive definite Hessian matrix with respect to differentiation in the endogenous parameters of the distribution. This is contrary to the maximum encountered in information theory. It is analyzed whether the model could be extended to a full saddle point formulation by maximizing the information entropy with respect to differentiation in the exogenous side conditions. The distribution patterns generated suggest that the framework could find applications in development economics.

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