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Extreme incomes and the estimation of poverty and inequality indicators from EU-SILC

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  • Van Kerm, Philippe

    (CEPS/INSTEAD)

Abstract

Micro-data estimates of welfare indices are known to be sensitive to observations from the tails of the income distribution. It is therefore customary to make adjustments to extreme data before estimating inequality and poverty statistics. This paper systematically evaluates the impact of such adjustments on indicators estimated from the EU-SILC (Community Statistics on Income and Living conditions) which is expected to become the reference source for comparative statistics on income distribution and social exclusion in the EU. Emphasis is put on the robustness of cross-country comparisons to alternative adjustments. Results from a sensitivity analysis considering both simple, classical adjustments and a more sophisticated approach based on modelling parametrically the tails of the income distribution are reported. Reassuringly, ordinal comparisons of countries are found to be robust to variants of data adjustment procedures. However, data adjustments are far from innocuous. Cardinal comparisons of countries reveal sensitive to the treatment of extreme incomes, even for seemingly small adjustments.

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Bibliographic Info

Paper provided by IRISS at CEPS/INSTEAD in its series IRISS Working Paper Series with number 2007-01.

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Length: 52 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:irs:iriswp:2007-01

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Keywords: social indicators ; poverty and inequality ; extreme incomes ; parametric tail ; EU-SILC;

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References

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  1. Frank A. Cowell & Maria-Pia Victoria-Feser, 2002. "Welfare Rankings in the Presence of Contaminated Data," Econometrica, Econometric Society, vol. 70(3), pages 1221-1233, May.
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Citations

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Cited by:
  1. Van Kerm, Philippe & Pi Alperin, Maria Noel, 2013. "Inequality, growth and mobility: The intertemporal distribution of income in European countries 2003–2007," Economic Modelling, Elsevier, vol. 35(C), pages 931-939.
  2. Kankarash, Milosh & Moors, Guy, 2007. "Heterogeneity in solidarity attitudes in Europe. Insights from a multiple-group latent-class factor approach," IRISS Working Paper Series 2007-06, IRISS at CEPS/INSTEAD, revised Jun 2007.
  3. Stéphane Mussard & Michel Terraza, 2009. "Décompositions des mesures d’inégalité : le cas des coefficients de Gini et d’entropie," Discussion Papers (REL - Recherches Economiques de Louvain) 2009022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. FUSCO Alessio & GUIO Anne-Catherine & MARLIER Eric, 2011. "Income poverty and material deprivation in European countries," CEPS/INSTEAD Working Paper Series 2011-04, CEPS/INSTEAD.
  5. Daniele Checchi & Vito Peragine & Laura Serlenga, 2010. "Fair and unfair income inequalities in Europe," Working Papers 174, ECINEQ, Society for the Study of Economic Inequality.
  6. Lilla, Marco, 2007. "Income Inequality and Education Premia," IRISS Working Paper Series 2007-11, IRISS at CEPS/INSTEAD.
  7. Márton Medgyesi, 2014. "Components of income inequality and its change in EU countries, 2004-2010," ImPRovE Working Papers 14/01, Herman Deleeck Centre for Social Policy, University of Antwerp.
  8. Voicu, Bogdan & Voicu, Malina & Strapcova, Katarina, 2007. "Engendered housework. A cross-european analysis," IRISS Working Paper Series 2007-07, IRISS at CEPS/INSTEAD.
  9. Michał Brzeziński & Krzysztof Kostro, 2010. "Income and consumption inequality in Poland, 1998–2008," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 41(4), pages 45-72.
  10. Mario Holzner, 2012. "The Determinants of Income Polarization on the Household and Country Level across the EU," wiiw Working Papers 93, The Vienna Institute for International Economic Studies, wiiw.
  11. Valentova, Marie, 2007. "Attitudes to Family Policy Arrangements in Relation to Attitudes to Family and division of Labour between Genders," IRISS Working Paper Series 2007-05, IRISS at CEPS/INSTEAD.

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