|This centre is a member of The LSE Research Laboratory [RLAB]: CASE | CVER | CEP | SERC | STICERD||Cookies?|
Paper No' DARP 050: | Full paper
Save Reference as: BibTeX File | EndNote Import File
Keywords: Welfare dominance; Lorenz curve, Pareto model, M-estimators.
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: Distributional Analysis Research Programme
Share this page: Google Bookmarks | Facebook | Twitter
Abstract:Lorenz curves and second-order dominance criteria are known to be sensitive to data contamination in the right tail of the distribution. We propose two ways of dealing with the problem: (1) Estimate Lorenz curves using parametric models for income distributions, and (2) Combine empirical estimation with a parametric (robust) estimation of the upper tail of the distribution using the Pareto model. Approach (2) is preferred because of its flexibility. Using simulations we show the dramatic effect of a few contaminated data on the Lorenz ranking and the performance of the robust approach (2). Statistical inference tools are also provided.
Copyright © RLAB & LSE 2003 - 2016 | LSE, Houghton Street, London WC2A 2AE | Contact: RLAB | Site updated 24 July 2016