Age-income profiles, income distribution and transition proportions

This paper presents a model to link age-income profiles, income distribution, and transition proportions. Transition proportions play a central role in the Markov-chain approach to income distribution. This stochastic model is much criticized, but it is shown in the paper that its most attractive characteristic can be maintained, while at the same time integrating it with a micro-economic foundation of age-income profiles. These profiles are inferred from capability development and individual choice. The model also analytically generates an income distribution.