Estimation of income distribution and detection of subpopulations: an explanatory model

Empirical evidence, obtained from nonparametric estimation of the income distribution, exhibits strong heterogeneity in most populations of interest. It is common, therefore, to suspect that the population is composed of several homogeneous subpopulations. Such an assumption leads us to consider mix...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Flachaire, Emmanuel, Nunez, Olivier
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2007
Subjects
Income distribution
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Summary:Empirical evidence, obtained from nonparametric estimation of the income distribution, exhibits strong heterogeneity in most populations of interest. It is common, therefore, to suspect that the population is composed of several homogeneous subpopulations. Such an assumption leads us to consider mixed income distributions whose components feature the distributions of the incomes of a particular homogeneous subpopulation. A model with mixing probabilities that are allowed to vary with exogenous individual variables that characterize each subpopulation is developed. This model simultaneously provides a flexible estimation of the income distribution, a breakdown into several subpopulations and an explanation of income heterogeneity.