Tails of Lorenz curves
Schluter, Christian and Trede, Mark (2002) Tails of Lorenz curves. Journal of Econometrics, 109, (1), 151-166. (doi:10.1016/S0304-4076(01)00145-2).
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The Lorenz dominance criterion is the centre piece of inequality analysis. Yet, the appeal of this criterion, which requires considering Lorenz curves in their entirety, is undermined by the practical problem that many sample Lorenz curves intersect in the tails. The commonly used inferential methods, based on central limit theorem arguments, do not apply to the tails since these contain too few observations. By contrast, we propose a test procedure for distributions whose tails lie in the domain of attraction of the Fréchet distribution, which fully takes into account the tail behaviour of Lorenz curves. Our experiments and empirical examples demonstrate the good performance of the proposed test: in many cases we are able to infer that despite sample tail crossings the population Lorenz curves do, in fact, exhibit Lorenz dominance.
|Keywords:||Lorenz curves, statistical inference, tail behaviour, regular variation|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||University Structure - Pre August 2011 > School of Social Sciences > Economics
|Date Deposited:||15 May 2006|
|Last Modified:||01 Jun 2011 11:31|
|Contact Email Address:||C.Schluter@soton.ac.uk|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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