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Inequality, Entropy and Goodness of Fit

Author

Listed:
  • Frank A. Cowell

    () (STICERD - LSE - London School of Economics and Political Science)

  • Emmanuel Flachaire

    () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)

  • Sanghamitra Bandyopadhyay

    () (STICERD - LSE - London School of Economics and Political Science)

Abstract

Specific functional forms are often used in economic models of distributions; goodness-of-fit measures are used to assess whether a functional form is appropriate in the light of real-world data. Standard approaches use a distance criterion based on the EDF, an aggregation of differences in observed and theoretical cumulative frequencies. However, an economic approach to the problem should involve a measure of the information loss from using a badly-fitting model. This would involve an aggregation of, for example, individual income discrepancies between model and data. We provide an axiomatisation of an approach and applications to illustrate its importance.

Suggested Citation

  • Frank A. Cowell & Emmanuel Flachaire & Sanghamitra Bandyopadhyay, 2011. "Inequality, Entropy and Goodness of Fit," Working Papers halshs-00591077, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00591077
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00591077
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Inequality, Entropy and Goodness of Fit
      by maximorossi in NEP-LTV blog on 2011-05-18 17:57:35

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    Cited by:

    1. Juan Manuel Caicedo & Alejandro Gaviria & Javier Moreno, 2012. "Hechos y palabras: la realidad colombiana vista a través de la prensa escrita," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 14(26), pages 137-168, January-J.
    2. William Horrace & Joseph Marchand & Timothy Smeeding, 2008. "Ranking inequality: Applications of multivariate subset selection," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(1), pages 5-32, March.

    More about this item

    Keywords

    goodness of fit; discrepancy; income distribution; inequality measurement;

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