Generalized Pareto Curves: Theory and Applications
By Thomas Blanchet, Julie Fournier, Thomas Piketty. The Review of Income and Wealth, 2017
167 citations recorded by the source corpus.
We define generalized Pareto curves as the curve of inverted Pareto coefficients b(p), where b(p) is the ratio between average income or wealth above rank p and the p-th quantile Q(p) (i.e. b(p) = E[X|X > Q(p)]/Q(p)). We use them to characterize entire distributions, including places like the top where power laws are a good description, and places further down where they are not. We develop a method to nonparametrically recover the entire distribution based on tabulated income or wealth data as is generally available from tax authorities, which produces smooth and realistic shapes of generalized Pareto curves. Us- ing detailed tabulations from quasi-exhaustive tax data, we demonstrate the precision of our method both empirically and analytically. It gives better results than the most com- monly used interpolation techniques. Finally, we use Pareto curves to identify recurring distributional patterns, and connect those findings to the existing literature that explains observed distributions by random growth models.
Subfields: Economics and Econometrics, Gender Studies, Sociology and Political Science
View Paper: https://www.semanticscholar.org/paper/f99eb4a90e8133dc766753aade6dbac716c1341f
Citations in the corpus
- From Soviets to oligarchs: inequality and property in Russia 1905-2016 (2018, unknown): “In order to exploit the income tax tabulations available over the 2008-2015 period we apply generalized Pareto interpolation techniques (Blanchet et al. 2017) and piecewise-linear correction factors f(p) above p0 up to the percentiles provided by the tax data in order to correct the top part of the…”
- Indian Income Inequality, 1922‐2015: From British Raj to Billionaire Raj? (2019, unknown): “The main methodological difference with Banerjee and Piketty lies in the use of generalized Pareto interpolation techniques (Blanchet et al., 2017) rather than standard Pareto distributions.”