ESTIMATION OF PROBABILITY MODELS FROM INCOME CLASS DATA

Jan Cramer

Statistica Neerlandica, 1986, vol. 40, issue 4, 237-250

Abstract: Abstract. Many household surveys report income by a limited number of classes only. In Engel curve analyses of such data, income is usually equated to the class midpoint. We argue that it is better to specify a continuous income distribution over the entire range, and to estimate its parameters jointly with the Engel curve coefficients; the position of the dependent variable within income classes is sufficiently informative about the income distribution parameters. The method is illustrated for a simple logit model of automobile ownership. The effect on estimation is perceptible, but not impressive; further analysis suggests that the standard method is acceptable provided some care is taken over the income class limits at the lower end of the range.

Date: 1986
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