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A new formulation of the Dagum distribution in terms of income inequality and poverty measures

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  • Domma, Filippo
  • Condino, Francesca
  • Giordano, Sabrina

Abstract

We provide new formulations of the Dagum family (Dagum, 1977), widely appreciated to model the income distribution, by making its parameters directly interpretable in terms of income median, inequality and poverty measures. The novelty is that the new distributions still belong to the class of Dagum distributions and enjoy its properties, but more the new parameters have a clear economic meaning. So the effects of determinants can be evaluated, directly and simultaneously, on measures of strategic relevance. This may be attractive since it helps policy makers to determine the appropriate response to the determinants of inequality and poverty. The peculiarities of three special cases are discussed and exemplified on real data from the Survey on Household Income and Wealth provided by the Bank of Italy.

Suggested Citation

  • Domma, Filippo & Condino, Francesca & Giordano, Sabrina, 2018. "A new formulation of the Dagum distribution in terms of income inequality and poverty measures," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 511(C), pages 104-126.
    • Handle: RePEc:eee:phsmap:v:511:y:2018:i:c:p:104-126
    DOI: 10.1016/j.physa.2018.07.027
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