Physica A 415 (2014) 54–60 Contents lists available at ScienceDirect Physica A journal homepage: www.elsevier.com/locate/physa Race, gender and the econophysics of income distribution in the USA ✩ Anwar Shaikh a,∗ , Nikolaos Papanikolaou b , Noe Wiener a a Department of Economics, New School for Social Research, New York, NY 10003, USA b Department of Economics, Lehman College of The City University of New York, New York, NY 10468, USA highlights • Shows that labor income distributions by race and gender are roughly exponential. • Results support Yakovenko econophysics ‘‘two-class’’ income distribution hypothesis. • Regressions yield R 2 ≈ 0.99 and actual/predicted mean incomes from 1.03 to 1.10. • Weibull probability distribution provides only marginally better results. • Social policy does not seem to affect intra-group race and gender distributions. article info Article history: Received 9 December 2013 Received in revised form 10 July 2014 Available online 1 August 2014 Keywords: Economics Econophysics Income distribution Classical statistical mechanics Gender and race abstract The econophysics ‘‘two-class’’ theory of Yakovenko and his co-authors shows that the dis- tribution of labor incomes is roughly exponential. This paper extends this result to US sub- groups categorized by gender and race. It is well known that Males have higher average incomes than Females, and Whites have higher average incomes than African-Americans. It is also evident that social policies can affect these income gaps. Our surprising finding is that nonetheless intra-group distributions of pre-tax labor incomes are remarkably similar and remain close to exponential. This suggests that income inequality can be usefully ad- dressed by taxation policies, and overall income inequality can be modified by also shifting the balance between labor and property incomes. © 2014 Elsevier B.V. All rights reserved. 1. Introduction The study of income distribution in capitalist societies can be traced back to Pareto’s (1897) finding that they seem to follow a particular (Pareto) power law. Modern evidence confirms that this law only applies to the upper tail of the distri- bution [1, p. 1], [2]. At the same time, it has been repeatedly shown that the lower bulk of the income distribution does not follow a Pareto law [3, p. 585]. One way to address these results is to try to encompass the whole range of incomes by means of a single distribution such as the log-normal, Levy, Gamma, Champernowne and others [3]. An alternate path has been proposed in the econophysics ‘‘two-class’’ theory of income distribution (EPTC) of Yakovenko and his co-authors. They argue on theoretical grounds that labor income approximately follows an exponential (thermal) distribution while property income follows a Pareto (su- perthermal) distribution. Personal incomes may of course encompass both labor and property incomes, but it is plausible ✩ We wish to thank to two anonymous referees for their insightful and helpful comments on earlier drafts. ∗ Corresponding author. Tel.: +1 7187683935. E-mail addresses: shaikh@newschool.edu, ashaikh606@gmail.com (A. Shaikh). http://dx.doi.org/10.1016/j.physa.2014.07.043 0378-4371/© 2014 Elsevier B.V. All rights reserved.