Estimating inequality with missing incomes

Brunori, Paolo ORCID: 0000-0002-1624-905X, Salas Rojo, Pedro ORCID: 0000-0002-8763-8909 and Verne, Paolo (2022) Estimating inequality with missing incomes. International Inequalities Institute Working Papers (82). London School of Economics and Political Science, London, UK.

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Abstract

The measurement of income inequality is affected by missing observations, especially if they are concentrated on the tails of an income distribution. This paper conducts an experiment to test how the different correction methods proposed by the statistical, econometric and machine learning literature address measurement biases of inequality due to item non-response. We take a baseline survey and artificially corrupt the data employing several alternative non-linear functions that simulate patterns of income nonresponse and show how biased inequality statistics can be when item non-responses are ignored. The comparative assessment of correction methods indicates that most methods are able to partially correct for missing data biases. Sample reweighting based on probabilities on non-response produces inequality estimates quite close to true values in most simulated missing data patterns. Matching and Pareto corrections can also be effective to correct for selected missing data patterns. Other methods, such as Single and Multiple imputations and Machine Learning methods are less effective. A final discussion provides some elements that help explaining these findings.

Item Type:	Monograph (Working Paper)
Official URL:	https://www.lse.ac.uk/International-Inequalities/P...
Additional Information:	© 2022 The Authors
Divisions:	International Inequalities Institute
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HB Economic Theory H Social Sciences > HN Social history and conditions. Social problems. Social reform H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification:	D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E64 - Incomes Policy; Price Policy O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources; Human Development; Income Distribution; Migration
Date Deposited:	09 Aug 2022 09:12
Last Modified:	01 Nov 2024 05:55
URI:	http://eprints.lse.ac.uk/id/eprint/115932

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