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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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    Cited by:

    1. Felix Bierbrauer & Pierre Boyer & Andreas Peichl & Daniel Weishaar, 2023. "The Taxation of Couples," Rationality and Competition Discussion Paper Series 405, CRC TRR 190 Rationality and Competition.
    2. Marko Ledic & Ivica Rubil & Ivica Urban, 2022. "Missing top incomes and tax-benefit microsimulation: evidence from correcting household survey data using tax records data," Working Papers 2201, The Institute of Economics, Zagreb.
    3. Vladimir Hlasny, 2021. "Parametric representation of the top of income distributions: Options, historical evidence, and model selection," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1217-1256, September.
    4. Felix J. Bierbrauer & Pierre C. Boyer & Andreas Peichl & Daniel Weishaar, 2023. "The Political Economy of Joint Taxation," ECONtribute Discussion Papers Series 239, University of Bonn and University of Cologne, Germany.
    5. Luis Bauluz & Filip Novokmet & Moritz Schularick, 2022. "The Anatomy of the Global Saving Glut," Working Papers halshs-03693216, HAL.
    6. Bertrand Garbinti & Jonathan Goupille-Lebret, 2019. "Inégalités de revenus et de richesse en France : évolutions et liens sur longue période," Working Papers 1934, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    7. Heck, Ines & Kapeller, Jakob & Wildauer, Rafael, 2020. "Vermögenskonzentration in Österreich: Ein Update auf Basis des HFCS 2017," Greenwich Papers in Political Economy 30683, University of Greenwich, Greenwich Political Economy Research Centre.
    8. Rustam Ibragimov & Paul Kattuman & Anton Skrobotov, 2021. "Robust Inference on Income Inequality: $t$-Statistic Based Approaches," Papers 2105.05335, arXiv.org, revised Nov 2021.
    9. Engel, Janina & Ohlwerter, Dennis & Scherer, Matthias, 2023. "On the estimation of distributional household wealth: addressing under-reporting via optimization problems with invariant Gini coefficient," Working Paper Series 2865, European Central Bank.
    10. Pablo Gutiérrez Cubillos, 2022. "Gini and undercoverage at the upper tail: a simple approximation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(2), pages 443-471, April.
    11. Ines Heck & Jakob Kapeller & Rafael Wildauer, 2020. "Vermögenskonzentration in Österreich," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 206, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.

    More about this item

    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 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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