Journal article

Modelling income data using two extensions of the exponential distribution

E Calderin-Ojeda, F Azpitarte, E Gomez-Deniz

PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS | ELSEVIER SCIENCE BV | Published : 2016

Abstract

In this paper we propose two extensions of the Exponential model to describe income distributions. The Exponential ArcTan (EAT) and the composite EAT–Lognormal models discussed in this paper preserve key properties of the Exponential model including its capacity to model distributions with zero incomes. This is an important feature as the presence of zeros conditions the modelling of income distributions as it rules out the possibility of using many parametric models commonly used in the literature. Many researchers opt for excluding the zeros from the analysis, however, this may not be a sensible approach especially when the number of zeros is large or if one is interested in accurately des..

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University of Melbourne Researchers

Grants

Awarded by Australian Research Council Centre of Excellence for Children and Families over the Life Course


Awarded by Ministerio de Economia y Competitividad, Spain


Awarded by Ministerio de Economia y Competitividad


Funding Acknowledgements

This paper uses confidentialized unit record file data from the HILDA Survey. The HILDA Survey Project was initiated and is funded by the Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research. This research was supported by the Australian Research Council Centre of Excellence for Children and Families over the Life Course (project number CE140100027). The Centre is administered by the Institute for Social Science Research at The University of Queensland, with nodes at The University of Western Australia, The University of Melbourne and The University of Sydney. The authors would like to express their gratitude to three anonymous referees for their relevant and useful comments. Enrique and Emilio are funded by the grant ECO2013-47092 (Ministerio de Economia y Competitividad, Spain). Francisco gratefully acknowledges financial support from the Ministerio de Economia y Competitividad (ECO2011-23460, ECO2013-46516-C4-2-R, ECO2014-52616-R).