Is the Distribution of Income Compatible with a Stable Distribution?
Mandelbrot (1961) proposed to apply the class of Pareto-Levy distributions - which belong to the Stable distributions - as a framework for modelling income distributions. He also presented theoretic arguments in favor of the Pareto-Levy distributions. In this paper we provide additional theoretical justification for this class of distributions. We also use micro data on individual market income to estimate the parameters of a Pareto-Levy distribution. Several estimation methods have been applied. The estimated Pareto-Levy distribution appears to fit the data well.
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- Rolf Aaberge, 1995. "Choosing Measures of Inequality for Empirical Applications," Discussion Papers 158, Statistics Norway, Research Department.
- van Dijk, Herman K & Kloek, Teun, 1980. "Inferential Procedures in Stable Distributions for Class Frequency Data on Incomes," Econometrica, Econometric Society, vol. 48(5), pages 1139-48, July.
- McCulloch, J Huston, 1997. "Measuring Tail Thickness to Estimate the Stable Index Alpha: A Critique," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 74-81, January.
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