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Averaging Income Distributions


  • Chotikapanich, D.
  • Griffiths, W.E.
  • Rao, D.S.P.


Various inequality and social welfare measures often depend heavily on the choice of a distribution of income. Picking a distribution that best fits the data in some sense involves throwing away information and does not allow for the fact that, by chance, a wrong choice can be made. It also does not allow for the statistical inference implications of making the wrong choice. Instead, Bayesian model averaging utilises a weighted average of the results from a number of income distributions, with each weight given by the probability that a distribution is 'correct'. In this study prior densities are placed on mean income, the mode of income and the Gini coefficient for Australian income units with one parent (1997-98). Then, using grouped sample data on incomes, posterior densities for the mean and mode of income, and the Gini coefficient are derived for a variety of income distributions. The model-averaged results from these income distributions are obtained.

Suggested Citation

  • Chotikapanich, D. & Griffiths, W.E. & Rao, D.S.P., 2001. "Averaging Income Distributions," Department of Economics - Working Papers Series 798, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:798

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    References listed on IDEAS

    1. Griffiths, William E & Chotikapanich, Duangkamon, 1997. "Bayesian Methodology for Imposing Inequality Constraints on a Linear Expenditure System with Demographic Factors," Australian Economic Papers, Wiley Blackwell, vol. 36(69), pages 321-341, December.
    2. Danilov, D.L. & Magnus, J.R., 2001. "On the Harm that Pretesting Does," Discussion Paper 2001-37, Tilburg University, Center for Economic Research.
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    Cited by:

    1. Duangkamon Chotikapanich & William E. Griffiths, 2006. "Bayesian Assessment of Lorenz and Stochastic Dominance in Income Distributions," Department of Economics - Working Papers Series 960, The University of Melbourne.

    More about this item


    Bayesian model averaging; Gini coefficient; grouped data;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution


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