Measuring income inequality: a robust semi-parametric approach
In practice, income distributions are often contaminated with outliers that can affect the estimation of the income inequality. In this study, we propose a robust method for measuring income inequality based on a semi-parametric approach that applicable to positive income data. The semi-parametric a...
| Main Authors: | , , , |
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| Format: | Article |
| Published: |
Elsevier BV
2021
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| Online Access: | http://psasir.upm.edu.my/id/eprint/94109/ |
| _version_ | 1848861913109233664 |
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| author | Mohd Safari, Muhammad Aslam Masseran, Nurulkamal Ibrahim, Kamarulzaman Hussain, Saiful Izzuan |
| author_facet | Mohd Safari, Muhammad Aslam Masseran, Nurulkamal Ibrahim, Kamarulzaman Hussain, Saiful Izzuan |
| author_sort | Mohd Safari, Muhammad Aslam |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | In practice, income distributions are often contaminated with outliers that can affect the estimation of the income inequality. In this study, we propose a robust method for measuring income inequality based on a semi-parametric approach that applicable to positive income data. The semi-parametric approach introduced here combines the inverse-Pareto, empirical, and Pareto distributions. In addition, a robust estimation method based on probability integral transform statistic is applied to estimate the shape parameters of the inverse-Pareto and Pareto models to allow for the presence of outliers in the lower and upper tails of an income distribution. Then, a semi-parametric form of the Lorenz curve and three inequality measures are derived, including the Gini coefficient, generalized entropy index, and Atkinson index. We conduct a simulation study to compare the performance of the proposed semi-parametric approach with that of the conventional non-parametric method for estimating income inequality in the presence of outliers. The results show that the income inequality measure based on the proposed semi-parametric approach outperforms the conventional non-parametric method. Lastly, we apply the proposed semi-parametric approach in the measurement of income inequality among households in Malaysia based on survey data of household incomes for the years 2007, 2009, 2012, and 2014. |
| first_indexed | 2025-11-15T13:08:41Z |
| format | Article |
| id | upm-94109 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-15T13:08:41Z |
| publishDate | 2021 |
| publisher | Elsevier BV |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-941092023-04-03T01:48:09Z http://psasir.upm.edu.my/id/eprint/94109/ Measuring income inequality: a robust semi-parametric approach Mohd Safari, Muhammad Aslam Masseran, Nurulkamal Ibrahim, Kamarulzaman Hussain, Saiful Izzuan In practice, income distributions are often contaminated with outliers that can affect the estimation of the income inequality. In this study, we propose a robust method for measuring income inequality based on a semi-parametric approach that applicable to positive income data. The semi-parametric approach introduced here combines the inverse-Pareto, empirical, and Pareto distributions. In addition, a robust estimation method based on probability integral transform statistic is applied to estimate the shape parameters of the inverse-Pareto and Pareto models to allow for the presence of outliers in the lower and upper tails of an income distribution. Then, a semi-parametric form of the Lorenz curve and three inequality measures are derived, including the Gini coefficient, generalized entropy index, and Atkinson index. We conduct a simulation study to compare the performance of the proposed semi-parametric approach with that of the conventional non-parametric method for estimating income inequality in the presence of outliers. The results show that the income inequality measure based on the proposed semi-parametric approach outperforms the conventional non-parametric method. Lastly, we apply the proposed semi-parametric approach in the measurement of income inequality among households in Malaysia based on survey data of household incomes for the years 2007, 2009, 2012, and 2014. Elsevier BV 2021-01-15 Article PeerReviewed Mohd Safari, Muhammad Aslam and Masseran, Nurulkamal and Ibrahim, Kamarulzaman and Hussain, Saiful Izzuan (2021) Measuring income inequality: a robust semi-parametric approach. Physica A: Statistical Mechanics and its Applications, 562. art. no. 125359. pp. 1-14. ISSN 0378-4371; ESSN: 1873-2119 https://www.sciencedirect.com/science/article/pii/S0378437120307159 10.1016/j.physa.2020.125359 |
| spellingShingle | Mohd Safari, Muhammad Aslam Masseran, Nurulkamal Ibrahim, Kamarulzaman Hussain, Saiful Izzuan Measuring income inequality: a robust semi-parametric approach |
| title | Measuring income inequality: a robust semi-parametric approach |
| title_full | Measuring income inequality: a robust semi-parametric approach |
| title_fullStr | Measuring income inequality: a robust semi-parametric approach |
| title_full_unstemmed | Measuring income inequality: a robust semi-parametric approach |
| title_short | Measuring income inequality: a robust semi-parametric approach |
| title_sort | measuring income inequality: a robust semi-parametric approach |
| url | http://psasir.upm.edu.my/id/eprint/94109/ http://psasir.upm.edu.my/id/eprint/94109/ http://psasir.upm.edu.my/id/eprint/94109/ |