The Bias of Inequality Measures in Very Small Samples: Some Analytic Results

David Giles

No 514, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: We consider the class of generalized entropy (GE) measures that are commonly used to measure inequality. When used in the context of very small samples, as is frequently the case in studies of industrial concentration, these measures are significantly biased. We derive the analytic expression for this bias for an arbitrary member of the GE family, using a small-sigma expansion. This expression is valid regardless of the sample size, is increasingly accurate as the sampling error decreases, and provides the basis for constructing ‘bias-corrected’ inequality measures. We illustrate the application of these results to data for the Canadian banking sector, and various U.S. industrial sectors.

Keywords: Inequality indices; generalized entropy; bias; small-sigma expansion (search for similar items in EconPapers)
JEL-codes: C13 C16 D31 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2005-08-02
New Economics Papers: this item is included in nep-ecm
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:0514

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