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Bayesian estimation of Persistent Income Inequality using the Lognormal Stochastic Volatility Model

Author

Listed:
  • Haruhisa Nishino

    (Chiba University)

  • Kazuhiko Kakamu

    (Chiba University)

  • Takashi Oga

    (Chiba University)

Abstract

We estimate inequality including Gini coefficients using a lognormal parametric model for an investigation of persistent inequality. The asymptotic theory of selected order statistics enables us to construct a linear model based on grouped data. We extend the linear model to a dynamic model in terms of a stochastic volatility (SV) model. Using Japanese data we estimate the SV model by the Markov chain Monte Carlo (MCMC) method and exploit a model comparison to choose a best model, concluding that the model with SV is better fitted to the data than the model without SV. It indicates the persistent inequality.

Suggested Citation

  • Haruhisa Nishino & Kazuhiko Kakamu & Takashi Oga, 2012. "Bayesian estimation of Persistent Income Inequality using the Lognormal Stochastic Volatility Model," Journal of Income Distribution, Ad libros publications inc., vol. 21(1), pages 88-101, March.
    • Handle: RePEc:jid:journl:y:2012:v:21:i:1:p:88-101
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    Citations

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    Cited by:

    1. Nishino, Haruhisa & Kakamu, Kazuhiko, 2015. "A random walk stochastic volatility model for income inequality," Japan and the World Economy, Elsevier, vol. 36(C), pages 21-28.
    2. Martin Feldkircher & Kazuhiko Kakamu, 2022. "How does monetary policy affect income inequality in Japan? Evidence from grouped data," Empirical Economics, Springer, vol. 62(5), pages 2307-2327, May.
    3. Sugasawa, Shonosuke & Kobayashi, Genya & Kawakubo, Yuki, 2020. "Estimation and inference for area-wise spatial income distributions from grouped data," Computational Statistics & Data Analysis, Elsevier, vol. 145(C).
    4. Guglielmo D’Amico & Giuseppe Di Biase & Raimondo Manca, 2015. "Measuring Income Inequality: An Application Of The Population Dynamic Theil'S Entropy," Accounting & Taxation, The Institute for Business and Finance Research, vol. 7(1), pages 103-114.
    5. Noriyuki Kunimoto & Kazuhiko Kakamu, 2021. "Is Bitcoin really a currency? A viewpoint of a stochastic volatility model," Papers 2111.15351, arXiv.org.

    More about this item

    Keywords

    Income Inequality; Lognormal distribution; Persistence; selected order statistics; stochastic volatility (SV) model; Markov Chain Monte Carlo (MCMC) method;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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