Robust Lorenz Curves: A Semiparametric Approach
AbstractLorenz curves and second-order dominance criteria are known to be sensitive to data contamination in the right tail of the distribution. We propose two ways of dealing with the problem: (1) Estimate Lorenz curves using parametric models for income distributions, and (2) Combine empirical estimation with a parametric (robust) estimation of the upper tail of the distribution using the Pareto model. Approach (2) is preferred because of its flexibility. Using simulations we show the dramatic effect of a few contaminated data on the Lorenz ranking and the performance of the robust approach (2). Statistical inference tools are also provided.
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Bibliographic InfoPaper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Distributional Analysis Research Programme Papers with number 50.
Date of creation: May 2001
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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp
Welfare dominance; Lorenz curve; Pareto model; M-estimators.;
Other versions of this item:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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