Robust Lorenz curves: a semi-parametric approach

Frank Cowell () and Maria-Pia Victoria-Feser ()

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

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.

Keywords: Welfare dominance; Lorenz curve; Pareto model; Mestimators (search for similar items in EconPapers)
JEL-codes: C13 D63 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2001-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://eprints.lse.ac.uk/2155/ Open access version. (application/pdf)

Related works:
Working Paper: Robust Lorenz Curves: A Semiparametric Approach (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:2155

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