Income distribution and inequality measurement: The problem of extreme values
We examine the statistical performance of inequality indices in the presence of extreme values in the data and show that these indices are very sensitive to the properties of the income distribution. Estimation and inference can be dramatically affected, especially when the tail of the income distribution is heavy, even when standard bootstrap methods are employed. However, use of appropriate semiparametric methods for modelling the upper tail can greatly improve the performance of even those inequality indices that are normally considered particularly sensitive to extreme values.
|Date of creation:||2007|
|Date of revision:|
|Publication status:||Published in Journal of Econometrics, Elsevier, 2007, 141 (2), pp.1044-1072. <10.1016/j.jeconom.2007.01.001>|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00176029|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- Braulke, Michael, 1983. "An approximation to the Gini coefficient for a population based on sparse information for sub-groups," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 75-81.
- Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September.
- Frank Cowell & Maria-Pia Victoria-Feser, 2001.
"Robust Lorenz curves : a semi-parametric approach,"
LSE Research Online Documents on Economics
2155, London School of Economics and Political Science, LSE Library.
- Frank A Cowell & Maria-Pia Victoria-Feser, 2001. "Robust Lorenz Curves: A Semiparametric Approach," STICERD - Distributional Analysis Research Programme Papers 50, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Russell Davidson & Emmanuel Flachaire, 2007.
"Asymptotic and bootstrap inference for inequality and poverty measures,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
- Davidson, Russell & Flachaire, Emmanuel, 2007. "Asymptotic and bootstrap inference for inequality and poverty measures," Journal of Econometrics, Elsevier, vol. 141(1), pages 141-166, November.
- Russell Davidson & Emmanuel Flachaire, 2004. "Asymptotic and bootstrap inference for inequality and poverty measures," Cahiers de la Maison des Sciences Economiques v04100, Université Panthéon-Sorbonne (Paris 1).
- Russell Davidson & Emmanuel Flachaire, 2006. "Asymptotic And Bootstrap Inference For Inequality And Poverty Measures," Departmental Working Papers 2005-06, McGill University, Department of Economics.
- McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
- Schluter, Christian & Trede, Mark, 2002. "Tails of Lorenz curves," Journal of Econometrics, Elsevier, vol. 109(1), pages 151-166, July.
- Cowell, Frank A., 1989. "Sampling variance and decomposable inequality measures," Journal of Econometrics, Elsevier, vol. 42(1), pages 27-41, September.
- Andrew Chesher & Christian Schluter, 2002.
"Welfare Measurement and Measurement Error,"
Review of Economic Studies,
Oxford University Press, vol. 69(2), pages 357-378.
- Anthony F. Shorrocks & James E. Foster, 1987. "Transfer Sensitive Inequality Measures," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 485-497.
- Cowell, Frank A & Victoria-Feser, Maria-Pia, 1996. "Robustness Properties of Inequality Measures," Econometrica, Econometric Society, vol. 64(1), pages 77-101, January.
- Peter Hall & Qiwei Yao, 2003. "Inference in Arch and Garch Models with Heavy--Tailed Errors," Econometrica, Econometric Society, vol. 71(1), pages 285-317, January.
When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00176029. 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: (CCSD)
If references are entirely missing, you can add them using this form.