The Pareto Distribution was named after Italian economist and sociologist Vilfredo Pareto. · Pareto observed that 80% of the country's wealth was concentrated in ...ParetoDistributionThe"80-20Rule"Home›Resources›Knowledge›Economics›ParetoDistributionWhatisParetoDistribution?TheParetoDistributionwasnamedafterItalianeconomistandsociologistVilfredoPareto.ItissometimesreferredtoastheParetoPrincipleorthe80-20Rule.TheParetoDistributionisusedindescribingsocial,scientific,andgeophysicalphenomenainsociety.Paretocreatedamathematicalformulaintheearly20thcenturythatdescribedtheinequalitiesinwealthdistributionEconomicInequalityEconomicinequalitymostoftenreferstodisparitiesinwealthandincomethatmayexistincertainsocieties.Economicinequalityisametricthatmanyjurisdictionsandgovernmentsmonitorinordertoassesstheimpactofpolicychanges.thatexistedinhisnativecountryofItaly.  Paretoobservedthat80%ofthecountry’swealthwasconcentratedinthehandsofonly20%ofthepopulation.ThetheoryisnowappliedinmanydisciplinessuchasincomesAnnualIncomeAnnualincomeisthetotalvalueofincomeearnedduringafiscalyear.Grossannualincomereferstoallearningsbeforeanydeductionsare,productivity,populations,andothervariables.TheParetodistributionservestoshowthatthelevelofinputsandoutputsisnotalwaysequal. HistoryofParetoDistributionTheParetoDistributionprinciplewasfirstemployedinItalyintheearly20thcenturytodescribethedistributionofwealthamongthepopulation.In1906,VilfredoParetointroducedtheconceptoftheParetoDistributionwhenheobservedthat20%ofthepeapodswereresponsiblefor80%ofthepeasplantedinhisgarden.HerelatedthisphenomenontothenatureofwealthdistributioninItaly,andhefoundthat80%ofthecountry’swealthwasownedbyabout20%ofitspopulation.Intermsoflandownership,theItalianobservedthat80%ofthelandwasownedbyahandfulofwealthycitizens,whocomprisedabout20%ofthepopulation.ThedefinitionoftheParetoDistributionwaslaterexpandedinthe1940sbyDr.JosephM.Juran,aprominentproductqualityguru.JuranappliedtheParetoprincipletoqualitycontrolforbusinessproductionto