A study of the personal income distribution in Australia

We analyze the data on personal income distribution from the Australian Bureau of Statistics. We compare fits of the data to the exponential, log-normal, and gamma distributions. The exponential function gives a good (albeit not perfect) description of 98% of the population in the lower part of the distribution. The log-normal and gamma functions do not improve the fit significantly, despite having more parameters, and mimic the exponential function. We find that the probability density at zero income is not zero, which contradicts the log-normal and gamma distributions, but is consistent with the exponential one. The high-resolution histogram of the probability density shows a very sharp and narrow peak at low incomes, which we interpret as the result of a government policy on income redistribution. (c) 2006 Elsevier B.V. All rights reserved.