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Extreme incomes and the estimation of poverty and inequality indicators from EU-SILC

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  • Van Kerm, Philippe

    (CEPS/INSTEAD)

Abstract

Micro-data estimates of welfare indices are known to be sensitive to observations from the tails of the income distribution. It is therefore customary to make adjustments to extreme data before estimating inequality and poverty statistics. This paper systematically evaluates the impact of such adjustments on indicators estimated from the EU-SILC (Community Statistics on Income and Living conditions) which is expected to become the reference source for comparative statistics on income distribution and social exclusion in the EU. Emphasis is put on the robustness of cross-country comparisons to alternative adjustments. Results from a sensitivity analysis considering both simple, classical adjustments and a more sophisticated approach based on modelling parametrically the tails of the income distribution are reported. Reassuringly, ordinal comparisons of countries are found to be robust to variants of data adjustment procedures. However, data adjustments are far from innocuous. Cardinal comparisons of countries reveal sensitive to the treatment of extreme incomes, even for seemingly small adjustments.

Suggested Citation

  • Van Kerm, Philippe, 2007. "Extreme incomes and the estimation of poverty and inequality indicators from EU-SILC," IRISS Working Paper Series 2007-01, IRISS at CEPS/INSTEAD.
  • Handle: RePEc:irs:iriswp:2007-01
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    References listed on IDEAS

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    1. Frank A. Cowell & Maria-Pia Victoria-Feser, 2002. "Welfare Rankings in the Presence of Contaminated Data," Econometrica, Econometric Society, vol. 70(3), pages 1221-1233, May.
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    Cited by:

    1. Tim Goedemé & Diego Collado, 2016. "The EU Convergence Machine at Work. To the Benefit of the EU's Poorest Citizens?," Journal of Common Market Studies, Wiley Blackwell, vol. 54(5), pages 1142-1158, September.
    2. Tim Goedemé & Lorena Zardo Trindade & Frank Vandenbroucke, 2017. "A Pan-European Perspective on Low-Income Dynamics in the EU," Working Papers 1703, Herman Deleeck Centre for Social Policy, University of Antwerp.
    3. Van Kerm, Philippe & Pi Alperin, Maria Noel, 2013. "Inequality, growth and mobility: The intertemporal distribution of income in European countries 2003–2007," Economic Modelling, Elsevier, vol. 35(C), pages 931-939.
    4. Checchi, Daniele & Peragine, Vito & Serlenga, Laura, 2010. "Fair and Unfair Income Inequalities in Europe," IZA Discussion Papers 5025, Institute for the Study of Labor (IZA).
    5. FUSCO Alessio & GUIO Anne-Catherine & MARLIER Eric, 2011. "Income poverty and material deprivation in European countries," LISER Working Paper Series 2011-04, LISER.
    6. Valentova, Marie, 2007. "Attitudes to Family Policy Arrangements in Relation to Attitudes to Family and division of Labour between Genders," IRISS Working Paper Series 2007-05, IRISS at CEPS/INSTEAD.
    7. Stéphane Mussard & Michel Terraza, 2009. "Décompositions des mesures d'inégalité : le cas des coefficients de Gini et d'entropie," Recherches économiques de Louvain, De Boeck Université, vol. 75(2), pages 151-181.
    8. Lilla, Marco, 2007. "Income Inequality and Education Premia," IRISS Working Paper Series 2007-11, IRISS at CEPS/INSTEAD.
    9. Márton Medgyesi, 2014. "Components of income inequality and its change in EU countries, 2004-2010," ImPRovE Working Papers 14/01, Herman Deleeck Centre for Social Policy, University of Antwerp.
    10. Tim Goedemé, 2013. "How much Confidence can we have in EU-SILC? Complex Sample Designs and the Standard Error of the Europe 2020 Poverty Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 110(1), pages 89-110, January.
    11. repec:eee:finlet:v:25:y:2018:i:c:p:36-40 is not listed on IDEAS
    12. Voicu, Bogdan & Voicu, Malina & Strapcova, Katarina, 2007. "Engendered housework. A cross-european analysis," IRISS Working Paper Series 2007-07, IRISS at CEPS/INSTEAD.
    13. Michał Brzeziński & Krzysztof Kostro, 2010. "Income and consumption inequality in Poland, 1998–2008," Bank i Kredyt, Narodowy Bank Polski, vol. 41(4), pages 45-72.
    14. Mario Holzner, 2012. "The Determinants of Income Polarization on the Household and Country Level across the EU," wiiw Working Papers 93, The Vienna Institute for International Economic Studies, wiiw.
    15. Fabrizi, Enrico & Trivisano, Carlo, 2016. "Small area estimation of the Gini concentration coefficient," Computational Statistics & Data Analysis, Elsevier, vol. 99(C), pages 223-234.
    16. Kankarash, Milosh & Moors, Guy, 2007. "Heterogeneity in solidarity attitudes in Europe. Insights from a multiple-group latent-class factor approach," IRISS Working Paper Series 2007-06, IRISS at CEPS/INSTEAD, revised Jun 2007.

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    Keywords

    social indicators ; poverty and inequality ; extreme incomes ; parametric tail ; EU-SILC;

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