It has been empirically observed that the income structure of the vast majority of populations in market-economy countries follows an exponential distribution. The empirical evidence has covered more than 66 countries, ranging from Europe to Latin America, North America, and Asia. Here, to further support exponential income distribution as a signature of the well-functioning market economy, we empirically show how the income structure of China evolved towards an exponential distribution after the market-oriented economic reformation. In particular, we strictly prove that, if the income structure of an economy obeys an exponential distribution, the income summation over all households leads to a neoclassical aggregate production function, in which the technology factor is exactly equal to society’s information stock. This finding provides an insight into understanding the underlying implication of technological progress.
JEL Classification: O33; D31; D83; C46