Robustness Properties of Inequality Measures: The Influence Function and the Principle of Transfers

Posted: 19 Feb 2008

See all articles by Frank Cowell

Frank Cowell

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)

Maria-Pia Victoria-Feser

University of Geneva - HEC

Date Written: October 1993

Abstract

Inequality measures are often used to summarise information about empirical income distributions. However, the resulting picture of the distribution and of the changes in the distribution can be severely distorted if the data are contaminated. The nature of this distortion will in general depend upon the underlying properties of the inequality measure. We investigate this issue theoretically using a technique based on the influence function, and illustrate the magnitude of the effect using a simulation. We consider both direct nonparametric estimation from the sample, and the indirect estimation using a parametric model; in the latter case we demonstrate the application of a robust estimation procedure.

Suggested Citation

Cowell, Frank A. and Victoria-Feser, Maria-Pia, Robustness Properties of Inequality Measures: The Influence Function and the Principle of Transfers (October 1993). LSE STICERD Research Paper No. 01; Econometrica Vol. 64, pp. 77-101, No. 1996. Available at SSRN: https://ssrn.com/abstract=1094726

Frank A. Cowell (Contact Author)

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 (0)171-955 7277 (Phone)
+44 (0)171-242 2357 (Fax)

Maria-Pia Victoria-Feser

University of Geneva - HEC ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland

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