Asymmetries of income and wealth of large firms explained by Zipf's Law

Abstract

This doctoral thesis is composed of three papers that study the asymmetries of income and wealth of large companies. The proposals of this doctoral dissertation are focused on proving that there is a mathematical progression that characterizes the way in which income and wealth are distributed among firms; This progression that also exists in other social phenomena is called the Zipf Law. To confirm the assertion, a goodness of fit test was first performed with the empirical data; then, through the linear regression by the method of Ordinary Least Squares and by the method of Discrete Generalized Beta Distribution, the Zipf coefficient was calculated.

It was found that for all years and with all variables, the Zipf Law on the distribution of income and wealth in Mexico is confirmed. To measure income, sales were taken as a study variable and to measure wealth, the amount of corporate assets was taken as a variable. The database used to perform all these calculations was the ranking of the 500 most important firms in Mexico published by the Expansión Magazine in the period 2006-2017.

Some of the problems of having a highly concentrated market is, according to economic theory, that consumers pay a higher price for goods and services and there is a lower supply of them by companies. Because the Zipf distribution belongs to the Pareto family distributions it was found that the distribution of income and wealth follow the 80-20 principle, that is to say that 20 percent of the largest firms appropriate 80 percent of income and wealth.

Finally, a qualitative study was carried out to know some of the social implications that result from the asymmetries existing between nations. These three papers that help solve the research question of this doctoral dissertation open the way for future research on the topic of income and wealth inequality, which are explained in detail in the conclusions section.

The results of this research have important public policy implications. On the one hand, there are implications on the issue of economic competition, but also some challenges for business schools to offer training for a vulnerable social sector that demands business training, which implies implementing disruptive actions. With this doctoral dissertation, some contributions have been made to the topic of income and wealth inequality, which are explained in detail in the final chapter of this thesis.