Generalized Pareto Curves: Theory and Applications

Thomas Blanchet, Juliette Fournier and Thomas Piketty
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Juliette Fournier: MIT - Massachusetts Institute of Technology

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Abstract: We define generalized Pareto curves as the curve of inverted Pareto coefficients b(p), where b(p) is the ratio between average income above rank p and the p-th quantile Q(p) (i.e., b(p)=E[X|X>Q(p)]/Q(p))). We use them to characterize income distributions. We develop a method to flexibly recover a continuous distribution based on tabulated income data as is generally available from tax authorities, which produces smooth and realistic shapes of generalized Pareto curves. Using detailed tabulations from quasi-exhaustive tax data, we show the precision of our method. It gives better results than the most commonly used interpolation techniques for the top half of the distribution.

Keywords: Income; Inequality; Pareto; Power law; Interpolation (search for similar items in EconPapers)
Date: 2022-03
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Citations: View citations in EconPapers (6)

Published in Review of Income and Wealth, 2022, 68 (1), pp.263-288. ⟨10.1111/roiw.12510⟩

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Related works:
Journal Article: Generalized Pareto Curves: Theory and Applications (2022)
Working Paper: Generalized Pareto Curves: Theory and Applications (2022)
Working Paper: Generalized Pareto Curves: Theory and Applications (2017)
Working Paper: Generalized Pareto Curves: Theory and Applications (2017)
Working Paper: Generalized Pareto Curves: Theory and Applications (2017)
Working Paper: Generalized Pareto Curves: Theory and Applications (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03760338

DOI: 10.1111/roiw.12510

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