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Entropy based European income distributions and inequality measures

Author

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  • Villas-Boas, Sofia B.
  • Fu, Qiuzi
  • Judge, George

Abstract

In this paper, instead of likelihood based methods that are fragile under model uncertainty, we use entropy based methods on time-ordered household income data to recover income distribution information on European countries and obtain an inequality income measure. For information recovery, we use a family of information theoretic entropy divergence measures to obtain income probability density functions and the corresponding inequality measures, which reflect how European country based economic behavioral systems are performing, and in terms of dynamics have changed over time.

Suggested Citation

  • Villas-Boas, Sofia B. & Fu, Qiuzi & Judge, George, 2019. "Entropy based European income distributions and inequality measures," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 514(C), pages 686-698.
    • Handle: RePEc:eee:phsmap:v:514:y:2019:i:c:p:686-698
    DOI: 10.1016/j.physa.2018.09.121
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    References listed on IDEAS

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    1. Facundo Alvaredo & Anthony Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1% in International and Historical Perspective," Post-Print halshs-00847231, HAL.
    2. James B. McDonald, 2008. "Some Generalized Functions for the Size Distribution of Income," Economic Studies in Inequality, Social Exclusion, and Well-Being, in: Duangkamon Chotikapanich (ed.), Modeling Income Distributions and Lorenz Curves, chapter 3, pages 37-55, Springer.
    3. Roine, Jesper & Waldenström, Daniel, 2014. "Long run trends in the distribution of income and wealth," Working Paper Series, Center for Fiscal Studies 2014:5, Uppsala University, Department of Economics.
    4. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    5. Thomas Piketty & Emmanuel Saez, 2014. "Inequality in the long run," Post-Print halshs-01053609, HAL.
    6. Judge,George G. & Mittelhammer,Ron C., 2012. "An Information Theoretic Approach to Econometrics," Cambridge Books, Cambridge University Press, number 9780521869591, November.
    7. A. Drăgulescu & V.M. Yakovenko, 2001. "Evidence for the exponential distribution of income in the USA," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 20(4), pages 585-589, April.
    8. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
    9. Duangkamon Chotikapanich & William E. Griffiths & Gholamreza Hajargasht & Wasana Karunarathne & D. S. Prasada Rao, 2018. "Using the GB2 Income Distribution," Econometrics, MDPI, vol. 6(2), pages 1-24, April.
    10. Duangkamon Chotikapanich & William E. Griffiths & Gholamreza Hajargasht & Wasana Karunarathne & D.S. Prasada Rao, 2018. "Using the GB2 Income Distribution: A Review," Department of Economics - Working Papers Series 2036, The University of Melbourne.
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    13. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
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    15. repec:hal:pseose:halshs-01053609 is not listed on IDEAS
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    Cited by:

    1. G.-Fivos Sargentis & Theano Iliopoulou & Panayiotis Dimitriadis & Nikolaos Mamassis & Demetris Koutsoyiannis, 2021. "Stratification: An Entropic View of Society’s Structure," World, MDPI, vol. 2(2), pages 1-22, March.
    2. Judge, George, 2023. "Information Recovery in Complex Economic Systems," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4jj70102, Department of Agricultural & Resource Economics, UC Berkeley.

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    More about this item

    Keywords

    Income probability distribution function; Micro income data; Information theoretic methods; Cressie–Read divergence; Entropy maximization; Pareto’s law; (PDFs);
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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