Income distribution and inequality measurement: The problem of extreme values
AbstractWe examine the statistical performance of inequality indices in the presence of extreme values in the data and show that these indices are very sensitive to the properties of the income distribution. Estimation and inference can be dramatically affected, especially when the tail of the income distribution is heavy, even when standard bootstrap methods are employed. However, use of appropriate methods for modelling the upper tail can greatly improve the performance of even those inequality indices that are normally considered particularly sensitive to extreme values.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 141 (2007)
Issue (Month): 2 (December)
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Web page: http://www.elsevier.com/locate/jeconom
Other versions of this item:
- Frank A. Cowell & Emmanuel Flachaire, 2004. "Income distribution and inequality measurement : the problem of extreme values," Cahiers de la Maison des Sciences Economiques v04101, Université Panthéon-Sorbonne (Paris 1).
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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