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Estimating Income Distributions From Grouped Data: A Minimum Quantile Distance Approach
[journal article]
Abstract This paper focuses on the estimation of income distribution from grouped data in the form of quantiles. We propose a novel application of the minimum quantile distance (MQD) approach and compare its performance with the maximum likelihood (ML) technique. The estimation methods are applied using thre... view more
This paper focuses on the estimation of income distribution from grouped data in the form of quantiles. We propose a novel application of the minimum quantile distance (MQD) approach and compare its performance with the maximum likelihood (ML) technique. The estimation methods are applied using three parametric distributions: the generalized beta distribution of the second kind (GB2), the Dagum distribution, and the Singh–Maddala distribution. We provide the density-quantile functions for these distributions, along with reproducible R code. A simulation study is conducted to evaluate the performance of the MQD and ML methods. The proposed methods are then applied to data from 30 European countries, utilizing the aforementioned parametric distributions. To validate the accuracy of the estimates, we compare them with estimates obtained from more detailed and informative microdata sets. The findings confirm the excellent performance of the considered parametric distributions in estimating income distribution. Additionally, the MQD approach is identified as a straightforward and reliable method for this purpose. Notably, the MQD method displays superior robustness in comparison to the ML technique when it comes to selecting suitable starting values for the underlying computation algorithm, specifically when dealing with the GB2 distribution.... view less
Keywords
income; income distribution; Europe; quantitative method; distribution; estimation; algorithm; parameter; inequality; social inequality; poverty; welfare; data; data preparation
Classification
Basic Research, General Concepts and History of Economics
Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods
Free Keywords
minimum quantile distance; maximum likelihood technique; grouped data; GB2 distribution; EU-SILC 2011
Document language
English
Publication Year
2023
Page/Pages
p. 1-18
Journal
Computational Economics (2023) Early View
DOI
https://doi.org/10.1007/s10614-023-10505-0
ISSN
1572-9974
Status
Published Version; peer reviewed