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The income distribution with coarse data

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  • Reza Daniels

Abstract

How do you estimate poverty, inequality and earnings when the income variable consists of a combination of point-identified, interval-identified, and missing observations? This paper proposes a unifying theoretical approach to the problem of deriving point estimates when such data are present. The methodology is based on the idea of coarse data, which includes as special cases data that are censored within some predefined interval and data that are missing. A key part of the framework is to establish whether inference based on a likelihood that ignores the coarsening mechanism is equivalent to inference based on a likelihood that properly accounts for it. Results demonstrate that while the interval data are not coarsened at random (CAR), the missing data are CAR for the sample of employed economically active individuals in South Africa using the Labour Force Survey (2000 September). This requires an imputation algorithm that correctly accounts for these types of coarsening, as both univariate and multivariate parameters are affected by the choice of imputation method. It is recommended that researchers apply this framework to all analyses of the income distribution based on household survey data.

Suggested Citation

  • Reza Daniels, 2008. "The income distribution with coarse data," Working Papers 82, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:82
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    Citations

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    Cited by:

    1. Koch, Steven & Alaba, Olufunke, 2010. "On health insurance and household decisions: A treatment effect analysis," Social Science & Medicine, Elsevier, vol. 70(2), pages 175-182, January.
    2. Aboozar Hadavand, 2017. "Misperceptions and mismeasurements: An analysis of subjective economic inequality," Working Papers 449, ECINEQ, Society for the Study of Economic Inequality.
    3. Reza C. Daniels, 2012. "Univariate Multiple Imputation for Coarse Employee Income Data," SALDRU Working Papers 88, Southern Africa Labour and Development Research Unit, University of Cape Town.
    4. Claire Vermaak, 2012. "Tracking poverty with coarse data: evidence from South Africa," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(2), pages 239-265, June.

    More about this item

    Keywords

    Ignorability; Coarse Data; Multiple Imputation; Earnings;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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