Is the Distribution of Income Compatible with a Stable Distribution?

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Is the Distribution of Income Compatible with a Stable Distribution?

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John K. Dagsvik and Bjørn H. Vatne () (Statistics Norway)

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John K. Dagsvik

Abstract

Mandelbrot (1961) proposed to apply the class of Pareto-Levy distributions - which belong to the Stable distributions - as a framework for modelling income distributions. He also presented theoretic arguments in favor of the Pareto-Levy distributions. In this paper we provide additional theoretical justification for this class of distributions. We also use micro data on individual market income to estimate the parameters of a Pareto-Levy distribution. Several estimation methods have been applied. The estimated Pareto-Levy distribution appears to fit the data well.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 246.

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Date of creation: Jan 1999
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Handle: RePEc:ssb:dispap:246

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-06-04 (All new papers)
NEP-LAB-2003-06-04 (Labour Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

McCulloch, J Huston, 1997. "Measuring Tail Thickness to Estimate the Stable Index Alpha: A Critique," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 74-81, January.
Rolf Aaberge, 1995. "Choosing Measures of Inequality for Empirical Applications," Discussion Papers 158, Research Department of Statistics Norway.
van Dijk, Herman K & Kloek, Teun, 1980. "Inferential Procedures in Stable Distributions for Class Frequency Data on Incomes," Econometrica, Econometric Society, vol. 48(5), pages 1139-48, July. [Downloadable!] (restricted)

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Dieter von Fintel, 2006. "Earnings bracket obstacles in household surveys – How sharp are the tools in the shed?," Working Papers 08/2006, Stellenbosch University, Department of Economics. [Downloadable!]

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