Applying Generalized Pareto Curves to Inequality Analysis

Blanchet, Thomas; Garbinti, Bertrand; Goupille-Lebret, Jonathan; Martínez-Toledano, Clara

doi:10.1257/pandp.20181075

Cited by 17 publications

(15 citation statements)

References 5 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…REDI is a resource for researchers particularly interested in top incomes. The method estimates top incomes without relying on the Pareto distribution, an advantage since true income distributions deviate in important ways from this idealized model (Hout 2004;Blanchet et al 2018).…”

Section: Advantages Of the Methodsmentioning

confidence: 99%

“…This is an arbitrary but convenient assumption (von Hippel et al 2016). Nonetheless, it has been shown that the Pareto REDI for Binned Data distribution is an inexact fit to this upper tail (Hout 2004;Blanchet et al 2018). This is important because even small errors in defining this distribution will result in large errors in estimating the variance and other parameters (Jargowsky and Wheeler 2018).…”

Section: Dealing With Top and Bottom Incomesmentioning

confidence: 99%

See 1 more Smart Citation

REDI for Binned Data: A Random Empirical Distribution Imputation method for estimating continuous incomes

King¹

2020

Preprint

View full text Add to dashboard Cite

Researchers often need to work with categorical income data. While the typical nonparametric (including midpoint) and parametric estimation methods used to estimate summary statistics both have advantages, they all carry assumptions which cause them to deviate in important ways from real world distributions of income. The method introduced here, Random Empirical Distribution Imputation (REDI), imputes discrete observations using binned income data, while also calcu- lating summary statistics. REDI achieves this through random cold-deck imputation from a real world reference dataset (here, the Current Population Survey ASEC). This imputation method reconciles bins between datasets or across years and handles top incomes. REDI has other ad- vantages of computing an income distribution that is nonparametric, bin consistent, area- and variance-preserving, continuous, and computationally fast. I provide proof of concept using two years of the American Community Survey.

show abstract

Section: Advantages Of the Methodsmentioning

confidence: 99%

Section: Dealing With Top and Bottom Incomesmentioning

confidence: 99%

REDI for Binned Data: A Random Empirical Distribution Imputation method for estimating continuous incomes

King¹

2020

Preprint

View full text Add to dashboard Cite

show abstract

“…Theoretically, it has been known that the generalized Pareto distribution is a fairly general family that includes the Pareto distribution and the exponential distribution as two special cases (Balkema and Haan, 1974;Pickands, 1975;Singh and Maddala, 1976;Cowell, 2000). In this regard, Blanchet et al (2017Blanchet et al ( , 2018 used the generalized Pareto distribution to describe the income structure of the total population, where the generalized Pareto distribution is defined as follows:…”

Section: Exponential Income Distributionmentioning

confidence: 99%

“…Clementi et al, 2012;Prinz, 2016;Irwin and Irwin, 2017;Rosser, 2019;Tao et al, 2019;Ma and Ruzic, 2020) and the top income class (less than 5% of populations) follows a Pareto distribution (Mandelbrot, 1960;Nirei and Souma, 2007;Atkinson et al, 2011;Aoki and Nirei, 2017;Tao et al, 2019). In this regard, Blanchet et al (2017Blanchet et al ( , 2018 have used the generalized Pareto distribution to describe the income structure of the total population. The generalized Pareto distribution is a fairly general family that includes the Pareto distribution and the exponential distribution as two special cases (Singh and Maddala, 1976;Cowell, 2000;Jenkins, 2016).…”

Section: Introductionmentioning

confidence: 99%

Technology factor as society’s information stock: An elegant proof

Tao¹

2021

Preprint

View full text Add to dashboard Cite

It has been empirically observed that the income structure of the vast majority of populations in market-economy countries follows an exponential distribution. The empirical evidence has covered more than 66 countries, ranging from Europe to Latin America, North America, and Asia. Here, to further support exponential income distribution as a signature of the well-functioning market economy, we empirically show how the income structure of China evolved towards an exponential distribution after the market-oriented economic reformation. In particular, we strictly prove that, if the income structure of an economy obeys an exponential distribution, the income summation over all households leads to a neoclassical aggregate production function, in which the technology factor is exactly equal to society’s information stock. This finding provides an insight into understanding the underlying implication of technological progress.JEL Classification: O33; D31; D83; C46

show abstract

“…Empirical evidence had covered more than 66 countries 19 , ranging from Europe to Latin America, North America, and Asia. Recently, Blanchet et al [4][5] proposed to use the generalized Pareto distribution to describe the income structure of the total population, where the generalized Pareto distribution is defined as follows 1-3 :…”

mentioning

confidence: 99%

Exponential or Pareto: towards an evolution of equal opportunity

Tao¹

2021

Preprint

View full text Add to dashboard Cite

Pareto distribution and exponential distribution are related by the generalized Pareto distribution, which has been proposed to describe the income structure of the total population. The underlying mechanism for driving the Pareto distribution has been known as the Matthew effect of income accumulation. Today, the Pareto distribution has been observed universally in the richest class (1%~3% of populations); however, this distribution could dominate a larger proportion of populations when the investigation dated back to Renaissance Europe, Hungarian medieval society, and ancient Egypt. By contrast, the underlying mechanism for driving exponential income distribution is due to the equal opportunity of market competition, which radically differs from the Matthew effect. Here, we empirically find that, during the last 40 years, the income structures of different market-economy countries uniformly exhibit a two-class pattern, in which the great majority of populations obeys an exponential distribution and only the remaining (richest) part follows a Pareto distribution. In particular, we empirically show how the income structure in China evolved to an exponential distribution after the market-oriented economic reformation. The finding of a larger proportion of populations evolving to an exponential income distribution may reveal a potential trend of human civilization towards equal opportunity.

show abstract

Applying Generalized Pareto Curves to Inequality Analysis

Cited by 17 publications

References 5 publications

REDI for Binned Data: A Random Empirical Distribution Imputation method for estimating continuous incomes

REDI for Binned Data: A Random Empirical Distribution Imputation method for estimating continuous incomes

Technology factor as society’s information stock: An elegant proof

Exponential or Pareto: towards an evolution of equal opportunity

Contact Info

Product

Resources

About