Estimating inequality with missing incomes

Paolo Brunori, Pedro Salas Rojo and Paolo Verne

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The measurement of income inequality is affected by missing observations, especially if they are concentrated on the tails of an income distribution. This paper conducts an experiment to test how the different correction methods proposed by the statistical, econometric and machine learning literature address measurement biases of inequality due to item non-response. We take a baseline survey and artificially corrupt the data employing several alternative non-linear functions that simulate patterns of income nonresponse and show how biased inequality statistics can be when item non-responses are ignored. The comparative assessment of correction methods indicates that most methods are able to partially correct for missing data biases. Sample reweighting based on probabilities on non-response produces inequality estimates quite close to true values in most simulated missing data patterns. Matching and Pareto corrections can also be effective to correct for selected missing data patterns. Other methods, such as Single and Multiple imputations and Machine Learning methods are less effective. A final discussion provides some elements that help explaining these findings.

Keywords: income inequality; item non-response; income distributions; inequality predictions; imputations (search for similar items in EconPapers)
JEL-codes: D31 D63 E64 O15 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2022-07
New Economics Papers: this item is included in nep-big
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://eprints.lse.ac.uk/115932/ Open access version. (application/pdf)

Related works:
Working Paper: Estimating Inequality with Missing Incomes (2022)
Working Paper: Estimating Inequality with Missing Incomes (2022)
Working Paper: Estimating Inequality with Missing Incomes (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:115932

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