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Inequality, Entropy and Goodness of Fit

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Author Info

  • Frank A. Cowell

    ()
    (STICERD - London School of Economics)

  • Emmanuel Flachaire

    ()
    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Sanghamitra Bandyopadhyay

    ()
    (STICERD - London School of Economics)

Abstract

Specific functional forms are often used in economic models of distributions; goodness-of-fit measures are used to assess whether a functional form is appropriate in the light of real-world data. Standard approaches use a distance criterion based on the EDF, an aggregation of differences in observed and theoretical cumulative frequencies. However, an economic approach to the problem should involve a measure of the information loss from using a badly-fitting model. This would involve an aggregation of, for example, individual income discrepancies between model and data. We provide an axiomatisation of an approach and applications to illustrate its importance.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00591077.

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Date of creation: 06 May 2011
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Handle: RePEc:hal:wpaper:halshs-00591077

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Related research

Keywords: goodness of fit; discrepancy; income distribution; inequality measurement;

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  1. Inequality, Entropy and Goodness of Fit
    by maximorossi in NEP-LTV blog on 2011-05-18 12:57:35
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Cited by:
  1. William Horrace & Joseph Marchand & Timothy Smeeding, 2008. "Ranking inequality: Applications of multivariate subset selection," Journal of Economic Inequality, Springer, vol. 6(1), pages 5-32, March.
  2. Juan Manuel Caicedo & Alejandro Gaviria & Javier Moreno, 2012. "Hechos y palabras: la realidad colombiana vista a través de la prensa escrita," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 14(26), pages 137-168, January-J.

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