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A robust semi-parametric approach for measuring income inequality in Malaysia

Muhammad Aslam Mohd Safari, Nurulkamal Masseran and Kamarulzaman Ibrahim

Physica A: Statistical Mechanics and its Applications, 2018, vol. 512, issue C, 1-13

Abstract: In this study, a robust semi-parametric approach which involves combining the empirical distribution and Pareto model is applied for measuring the income distribution in Malaysia based on the survey data of household incomes for the years of 2007, 2009, 2012 and 2014. From our analysis, it is found that the Pareto model is well fitted to the top household incomes for all years considered, suggesting that this model is a suitable parametric distribution to describe the top household incomes in Malaysia. Based on the semi-parametric Gini, generalized entropy and Atkinson indices, it is found that the income inequality shows a decreasing trend over the period, indicating an improvement of income distribution in Malaysia. Moreover, the fitted semi-parametric Lorenz curves show that the economic pie of the high income group reduced slightly after being taken up by the low income group while there is no clear change for the middle household income group.

Keywords: Income distribution; Pareto distribution; Power-law; Probability integral transform statistics; Semi-parametric model; Survey samples (search for similar items in EconPapers)
Date: 2018
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