Income distribution and inequality measurement: The problem of extreme values

Frank Cowell () and Emmanuel Flachaire

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Abstract: We examine the statistical performance of inequality indices in the presence of extreme values in the data and show that these indices are very sensitive to the properties of the income distribution. Estimation and inference can be dramatically affected, especially when the tail of the income distribution is heavy, even when standard bootstrap methods are employed. However, use of appropriate semiparametric methods for modelling the upper tail can greatly improve the performance of even those inequality indices that are normally considered particularly sensitive to extreme values.

Keywords: inequality measures; statistical performance; robustness (search for similar items in EconPapers)
Date: 2007
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00176029
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Published in Econometrics, 2007, 141 (2), pp.1044-1072. ⟨10.1016/j.jeconom.2007.01.001⟩

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Related works:
Journal Article: Income distribution and inequality measurement: The problem of extreme values (2007)
Working Paper: Income distribution and inequality measurement: The problem of extreme values (2007)
Working Paper: Income distribution and inequality measurement: the problem of extreme values (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00176029

DOI: 10.1016/j.jeconom.2007.01.001

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