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Applying Generalized Pareto Curves to Inequality Analysis

Author

Listed:
  • Thomas Blanchet
  • Bertrand Garbinti
  • Jonathan Goupille-Lebret
  • Clara Martínez-Toledano

Abstract

A generalized Pareto curve is defined as the curve of inverted Pareto coefficients b(p), where b(p) is the ratio between average income or wealth above rank p and the p-th quantile. We present this concept and show how it can be used to better estimate distributions, especially from tax tabulations. By providing a simple decomposition of top shares, we discuss how studying inverted Pareto coefficients can improve the understanding of inequality dynamics. We also show how it helps to better analyze wealth and income concentrations along the distribution, using data for France, Spain, the United States, and China.

Suggested Citation

  • Thomas Blanchet & Bertrand Garbinti & Jonathan Goupille-Lebret & Clara Martínez-Toledano, 2018. "Applying Generalized Pareto Curves to Inequality Analysis," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 114-118, May.
  • Handle: RePEc:aea:apandp:v:108:y:2018:p:114-18
    Note: DOI: 10.1257/pandp.20181075
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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