Evaluation of the goodness of fit of new statistical size distributions with consideration of accurate income inequality estimation
This paper compares the goodness-of-fit of two new types of parametric income distribution models (PIDMs), the kappa-generalized (kG) and double-Pareto lognormal (dPLN) distributions, with that of beta-type PIDMs using US and Italian data for the 2000s. A three-parameter model kG tends to estimate the Lorenz curve and income inequality indices more accurately when the likelihood value is similar to that of the beta-type PIDMs. For the first half of the 2000s in the USA, the kG outperforms the other PIDMs in goodness-of-fit evaluated by both frequency-based criteria (such as the maximum likelihood value) and money-amount-based criteria (such as accuracy of estimation of the Lorenz curve). A four-parameter model dPLN generally outperforms the GB2 in both criteria. Furthermore, when the overall income distribution is approximated by a mixture of distributions fitted separately for each age class of the household heads (the ‘MLE-by-Age' method), the goodness-of-fit of the dPLN mixture model is found to be comparable to or higher than that of all of the PIDMs in the ordinary MLE fit, and, in the overall evaluation, this mixture model outperforms all of the single PIDMs in the sense that it is better fitted according to at least in one of the two criteria in almost all cases. The dPLN and its mixture model are found to have an explicit analytic expression for the Gini coefficient. The dPLN is therefore also suitable for the MLE-by-Age method in this respect.
Volume (Year): 32 (2012)
Issue (Month): 4 ()
|Contact details of provider:|| |
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.:
- McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-663, May.
- F. Clementi & M. Gallegati & G. Kaniadakis, 2007.
"κ-generalized statistics in personal income distribution,"
The European Physical Journal B: Condensed Matter and Complex Systems,
Springer;EDP Sciences, vol. 57(2), pages 187-193, May.
- F. Clementi & M. Gallegati & G. Kaniadakis, 2006. "k-Generalized Statistics in Personal Income Distribution," Papers physics/0607293, arXiv.org, revised Feb 2007.
- Okamoto, Masato, 2012. "The Relationship between the Equivalence Scale and the Inequality Index and Its Impact on the Measurement of Income Inequality," MPRA Paper 37410, University Library of Munich, Germany.
- Masato Okamoto, 2012. "The Relationship between the Equivalence Scale and the Inequality Index and its Impact on the Measurement of Income Inequality," LIS Working papers 575, LIS Cross-National Data Center in Luxembourg.
- Toda, Alexis Akira, 2012. "The double power law in income distribution: Explanations and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 364-381.
- F. Clementi & M. Gallegati & G. Kaniadakis, 2009. "A k-generalized statistical mechanics approach to income analysis," Papers 0902.0075, arXiv.org, revised Feb 2009.
- McDonald, James B. & Xu, Yexiao J., 1995. "A generalization of the beta distribution with applications," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 133-152.
- McDonald, James B. & Xu, Yexiao J., 1995. "A generalization of the beta distribution with applications," Journal of Econometrics, Elsevier, vol. 69(2), pages 427-428, October.
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-12-00636. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.