Using the Pareto Distribution to Improve Estimates of Topcoded Earnings

Armour, Philip; Burkhauser, Richard V.; Larrimore, Jeff

doi:10.1111/ecin.12299

Cited by 34 publications

(21 citation statements)

References 49 publications

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“…15,19 If the participant was in the highest bracket at each visit, we multiplied the value of the highest income category by 1.5 following the Pareto distribution. 20 Thus, the highest income bracket at both visits was interpreted as $75 000.…”

Section: Key Pointsmentioning

confidence: 99%

Longitudinal Associations Between Income Changes and Incident Cardiovascular Disease

et al. 2019

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IMPORTANCE Higher income is associated with lower incident cardiovascular disease (CVD). However, there is limited research on the association between changes in income and incident CVD. OBJECTIVE To examine the association between change in household income and subsequent risk of CVD. DESIGN, SETTING, AND PARTICIPANTS The Atherosclerosis Risk In Communities (ARIC) study is an ongoing, prospective cohort of 15 792 community-dwelling men and women, of mostly black or white race, from 4 centers in the United States (Jackson, Mississippi; Washington County, Maryland; suburbs of Minneapolis, Minnesota; and Forsyth County, North Carolina), beginning in 1987. For our analysis, participants were followed up until December 31, 2016. EXPOSURES Participants were categorized based on whether their household income dropped by more than 50% (income drop), remained unchanged/changed less than 50% (income unchanged), or increased by more than 50% (income rise) over a mean (SD) period of approximately 6 (0.3) years between ARIC visit 1 (1987-1989) and visit 3 (1993-1995). MAIN OUTCOMES AND MEASURES Our primary outcome was incidence of CVD after ARIC visit 3, including myocardial infarction (MI), fatal coronary heart disease, heart failure (HF), or stroke during a mean (SD) of 17 (7) years. Analyses were adjusted for sociodemographic variables, health behaviors, and CVD biomarkers. RESULTS Of the 8989 included participants (mean [SD] age at enrollment was 53 [6] years, 1820 participants were black [20%], and 3835 participants were men [43%]), 900 participants (10%) experienced an income drop, 6284 participants (70%) had incomes that remained relatively unchanged, and 1805 participants (20%) experienced an income rise. After full adjustment, those with an income drop experienced significantly higher risk of incident CVD compared with those whose incomes remained relatively unchanged (hazard ratio, 1.17; 95% CI, 1.03-1.32). Those with an income rise experienced significantly lower risk of incident CVD compared with those whose incomes remained relatively unchanged (hazard ratio, 0.86; 95% CI, 0.77-0.96). CONCLUSIONS AND RELEVANCE Income drop over 6 years was associated with higher risk of subsequent incident CVD over 17 years, while income rise over 6 years was associated with lower risk of subsequent incident CVD over 17 years. Health professionals should have greater awareness of the influence of income change on the health of their patients.

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Section: Key Pointsmentioning

confidence: 99%

Longitudinal Associations Between Income Changes and Incident Cardiovascular Disease

et al. 2019

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“…Freenenberg and Poterba (1993) have shown that this interpolation provides good empirical estimates of the incomes of the top fractals. Subsequent studies of income distribution at the top have in fact confirmed the reliability of the Pareto interpolation, including among others Piketty and Saez (2003), Atkinson and Piketty (2007) and Atkinson, Piketty and Saez (2011) and recently Armour et al(2014).…”

Section: Income Interpolationmentioning

confidence: 79%

Fundamental accrued capital gains and the measurement of top incomes: an application to Chile

2016

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Most previous studies of income inequality have either ignored capital gains or have used taxable realized capital gains to estimate top incomes. Neither of these approaches is fully satisfactory. We apply for the first time a new methodology that allows us to account for fundamental accrued capital gains as part of the top incomes in a theoretically consistent manner. We estimate the shares of the super-rich in Chile showing that accrued capital gains have a large impact on these estimates. Also, the top income shares estimated using fundamental capital gains appear to exhibit a more stable and presumably more plausible time profile than estimates based on capital gains derived from asset market variation

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“…We again find that the topmost observations may be distributed too narrowly compared to what would be expected under the Pareto law (table A5). Armour et al (2016) apply a similar method using known information on the number of top-coded observations; our method is not limited to the case of topcoding, but also allows for general mismeasurement, outliers, or nonresponse. Jenkins (2017) discusses the appropriate type of Pareto specification and cutoffs for estimation.…”

Section: Available Datamentioning

confidence: 99%

“…To compare the actual distributions of top expenditures to distributions that may be predicted in the given countries, and study the presence of extreme values in our data, we follow an approach applied by Atkinson, Cowell, Jenkins, Piketty and others to summarize the dispersion of economic outcomes by a parametric distribution, report properties of the estimated distribution, and use the estimates to correct the observed top tail for suspected statistical problems (Atkinson et al 2011;Armour et al 2016). 5 9Inequality estimates imputed from parametric distributions can be less sensitive to extreme observations and sampling variations than non-parametric observations from actual survey data.…”

Section: Replacement Using Values From a Pareto Distributionmentioning

confidence: 99%

Top expenditure distribution in Arab countries and the inequality puzzle1

Hlásny¹

2020

JEM

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This study was motivated by reports of a mismatch between inequality experienced on the streets across the Arab region, and that estimated in household expenditure surveys. The study uses eleven surveys from Egypt, Jordan, Palestine, Sudan and Tunisia to investigate whether the dispersion of top expenditures and measurement errors in them bias the measurement of inequality. The expenditure distributions are corrected by replacing potentially mismeasured values with those drawn from parametric distributions. Across all surveys, expenditure inequality is found to be at or below that found in emerging countries worldwide. The Gini is consistently 0.30-0.32 in Egypt, 0.35-0.37 in Jordan, and 0.38-0.43 in Palestine, Sudan and Tunisia. Several surveys include outliers raising inequality estimates. The Egyptian, Palestinian, and Tunisian surveys exhibit smoother top tails of expenditures, approximable by parametric distributions. Across years leading up to the Arab Spring, the estimates in these countries show falling inequality, suggesting that data problems are not behind the Arab inequality puzzle.

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Using the Pareto Distribution to Improve Estimates of Topcoded Earnings

Cited by 34 publications

References 49 publications

Longitudinal Associations Between Income Changes and Incident Cardiovascular Disease

Longitudinal Associations Between Income Changes and Incident Cardiovascular Disease

Fundamental accrued capital gains and the measurement of top incomes: an application to Chile

Top expenditure distribution in Arab countries and the inequality puzzle1

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