Inferences on functions of Pareto parameters with application to income inequality measures

ABSTRACT

The Theil, Pietra, Éltetö and Frigyes measures of income inequality associated with the Pareto distribution function are expressed in terms of parameters defining the Pareto distribution. Inference procedures based on the generalized variable method, the large sample method, and the Bayesian method for testing of, and constructing confidence interval for, these measures are discussed. The results of Monte Carlo study are used to compare the performance of the suggested inference procedures from a population characterized by a Pareto distribution.

KEYWORDS:

• Bayesian method
• Eltetö and Frigyes
• Generalized variable method
• Large sample method
• Pareto distribution
• Pietra, Theil

MATHEMATICS SUBJECT CLASSIFICATION:

• 62F03
• 62F10
• 62F15
• 62F40

Acknowledgments

We are greatly indebted to the Editor-in-Chief and anonymous referees whose constructive and thoughtful comments on the earlier draft led to greater improvements in the article's content.