Determination of Pareto Exponents in Economic Models Driven by Markov Multiplicative Processes

This article contains new tools for studying the shape of stationary distribution sizes in a dynamic economic system which units experience random multiplicative shocks and are occasionally reset. Each unit has Markov‐switching type, influences their growth rate reset probability. We show that size Pareto upper tail, with exponent equal to unique positive solution an equation involving spectral radius certain matrix‐valued function. Under nonlattice condition on rates, eigenvector associated provides types tail distribution.