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A Comparison of Parametric Models of Income Distribution across Countries and over Time

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  • Ripsy Bandourian
  • Robert Turley
  • James McDonald

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Abstract

The five-parameter generalized beta distribution and ten of its special cases are considered as models fore the size distribution of income. The models are fit to income data for 23 countries and various years - a total of 82 datasets. Of the models considered, the Weibull, Daagum and generalized beta of the second kind are best fitting of the models with two, three and four parameters for 62 percent, 84 percent, and 96 percent of the data sets, respectively. Increasing inequality with respect to pre-tax income is observed in most of the countries considered.

Suggested Citation

  • Ripsy Bandourian & Robert Turley & James McDonald, 2002. "A Comparison of Parametric Models of Income Distribution across Countries and over Time," LIS Working papers 305, LIS Cross-National Data Center in Luxembourg.
  • Handle: RePEc:lis:liswps:305
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    References listed on IDEAS

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    1. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-970, September.
    2. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-663, May.
    3. Sarabia, Jose Maria & Castillo, Enrique & Slottje, Daniel J., 2002. "Lorenz ordering between McDonald's generalized functions of the income size distribution," Economics Letters, Elsevier, vol. 75(2), pages 265-270, April.
    4. Salem, A B Z & Mount, T D, 1974. "A Convenient Descriptive Model of Income Distribution: The Gamma Density," Econometrica, Econometric Society, vol. 42(6), pages 1115-1127, November.
    5. Parker, Simon C., 1999. "The generalised beta as a model for the distribution of earnings," Economics Letters, Elsevier, vol. 62(2), pages 197-200, February.
    6. 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.
    7. Thurow, Lester C, 1970. "Analyzing the American Income Distribution," American Economic Review, American Economic Association, vol. 60(2), pages 261-269, May.
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    Cited by:

    1. Wang, S. & Kim, A.A. & Johnson, E.M., 2017. "Understanding the deterministic and probabilistic business cases for occupant based plug load management strategies in commercial office buildings," Applied Energy, Elsevier, vol. 191(C), pages 398-413.
    2. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2011. "Estimating trends in US income inequality using the Current Population Survey: the importance of controlling for censoring," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(3), pages 393-415, September.
    3. Masato Okamoto, 2013. "Extension of the ?-generalized distribution: new four-parameter models for the size distribution of income and consumption," LIS Working papers 600, LIS Cross-National Data Center in Luxembourg.
    4. Walter, Paul & Weimer, Katja, 2018. "Estimating poverty and inequality indicators using interval censored income data from the German microcensus," Discussion Papers 2018/10, Free University Berlin, School of Business & Economics.
    5. Geoff Willis, 2015. "Income distribution and income shares: wealth and income distributions explained using generalised Lotka-Volterra SFC ABM models," International Review of Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 816-842, November.
    6. repec:gam:jecnmx:v:6:y:2018:i:2:p:22-:d:142189 is not listed on IDEAS
    7. repec:eee:dyncon:v:104:y:2019:i:c:p:39-73 is not listed on IDEAS
    8. Papadopoulos, Georgios, 2019. "Income inequality, consumption, credit and credit risk in a data-driven agent-based model," Journal of Economic Dynamics and Control, Elsevier, vol. 104(C), pages 39-73.

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