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Income inequality in Romania: The exponential-Pareto distribution

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  • Oancea, Bogdan
  • Andrei, Tudorel
  • Pirjol, Dan

Abstract

We present a study of the distribution of the gross personal income and income inequality in Romania, using individual tax income data, and both non-parametric and parametric methods. Comparing with official results based on household budget surveys (the Family Budgets Survey and the EU-SILC data), we find that the latter underestimate the income share of the high income region, and the overall income inequality. A parametric study shows that the income distribution is well described by an exponential distribution in the low and middle incomes region, and by a Pareto distribution in the high income region with Pareto coefficient α=2.53. We note an anomaly in the distribution in the low incomes region (∼9,250 RON), and present a model which explains it in terms of partial income reporting.

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  • Oancea, Bogdan & Andrei, Tudorel & Pirjol, Dan, 2017. "Income inequality in Romania: The exponential-Pareto distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 469(C), pages 486-498.
    • Handle: RePEc:eee:phsmap:v:469:y:2017:i:c:p:486-498
    DOI: 10.1016/j.physa.2016.11.094
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