Three-Part Composite Pareto Modelling for Income Distribution in Malaysia

Muhammad Hilmi Abdul Majid (), Kamarulzaman Ibrahim and Nurulkamal Masseran
Additional contact information
Muhammad Hilmi Abdul Majid: Department of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia, Bangi 43600, Selangor, Malaysia
Kamarulzaman Ibrahim: Department of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia, Bangi 43600, Selangor, Malaysia
Nurulkamal Masseran: Department of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia, Bangi 43600, Selangor, Malaysia

Mathematics, 2023, vol. 11, issue 13, 1-15

Abstract: Income distribution models can be useful for describing the economic properties of a population. In this study, three-part composite Pareto models are fitted to the income distribution in Malaysia for the years 2007, 2009, 2012, 2014, and 2016. The three-part composite Pareto models divide the population into three parts, each following a different distribution model. The lower part follows the inverse Pareto distribution, the upper part follows the Pareto distribution, and the middle part follows another unspecified distribution model. For application in income data, the use of Gaussian mixture distribution is proposed for the middle part, making the inverse Pareto–Gaussian mixture-Pareto distribution model semi-parametric. From the model, it is found that the levels of income inequality in the lower and upper income groups decrease over the period of study. Additionally, the proportion of data following the inverse Pareto distribution in the model is highly correlated with the official absolute poverty incidence.

Keywords: composite model; income distribution; income inequality; Pareto distribution (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/11/13/2899/pdf (application/pdf)
https://www.mdpi.com/2227-7390/11/13/2899/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:11:y:2023:i:13:p:2899-:d:1181868

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().