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PARETO EXTRAPOLATION USING GROUPED INCOME DATA *
Author(s) -
Cloutier Norman R.
Publication year - 1988
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.1988.tb01092.x
Subject(s) - extrapolation , econometrics , pareto principle , income distribution , distribution (mathematics) , pareto distribution , economics , regression , statistics , regression analysis , ordinary least squares , grouped data , mathematics , linear regression , inequality , mathematical analysis
. The distribution of above‐median income groups can be described accurately by OLS regression of the Pareto distribution. The excellent fit of log‐linear regression has led some researchers to conclude that extrapolated income measures in the open end of the distribution are reliable. The analysis of income distribution data for metropolitan areas reveals: (1) that OLS tends to consistently overestimate the number of families in the tail, and (2) that the overestimation can have serious implications for hypothesis testing.