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The top tail of South Africa's earnings distribution 1993-2014: Evidence from the Pareto distribution

Author

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  • Martin Wittenberg

    (DataFirst, SALDRU, University of Cape Town)

Abstract

We estimate the parameters of a Pareto distribution for South African earnings as measured through the October Household Surveys, Labour Force Surveys and Quarterly Labour Force Surveys, as assembled in the Post-Apartheid Labour Market Series (PALMS). We develop an outlier detection algorithm consistent with this distribution and then adjust the Gini coefficient for inequality in the top tail, using the robust estimation technique of Cowell and Flachaire. That procedure suggests that wage inequality is a bit higher than conventionally estimated. We also show that the top tail of the South African earnings distribution is 'thick tailed' and explore what that means. Our analyses show big shifts in the distribution in some of the surveys in ways that suggest measurement changes rather than changes in the underlying distribution.

Suggested Citation

  • Martin Wittenberg, 2018. "The top tail of South Africa's earnings distribution 1993-2014: Evidence from the Pareto distribution," SALDRU Working Papers 224, Southern Africa Labour and Development Research Unit, University of Cape Town.
    • Handle: RePEc:ldr:wpaper:224
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    File URL: https://www.opensaldru.uct.ac.za/handle/11090/908
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    Cited by:

    1. Murray Leibbrandt & Vima Ranchhod & Pippa Green, 2018. "Taking stock of South African income inequality," WIDER Working Paper Series 184, World Institute for Development Economic Research (UNU-WIDER).
    2. Murray Leibbrandt & Vimal Ranchhod & Pippa Green, 2018. "Taking stock of South African income inequality," WIDER Working Paper Series wp-2018-184, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Pareto distribution; earnings; inequality;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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