Robust Lorenz Curves: A Semiparametric Approach
Frank Cowell () and
STICERD - Distributional Analysis Research Programme Papers from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE
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; M-estimators. (search for similar items in EconPapers)
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Working Paper: Robust Lorenz curves: a semi-parametric approach (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stidar:50
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