Please use this identifier to cite or link to this item: http://hdl.handle.net/10553/42094
Title: Modelling income data using two extensions of the exponential distribution
Authors: Calderín-Ojeda, Enrique
Azpitarte, Francisco
Gómez Déniz, Emilio 
UNESCO Clasification: 530703 Modelos y teorías del desarrollo económico
Keywords: Australia
Exponential distribution
Income distribution
Lognormal distribution
Mixture model, et al
Issue Date: 2016
Journal: Physica A: Statistical Mechanics and its Applications 
Abstract: In this paper we propose two extensions of the Exponential model to describe income distributions. The Exponential ArcTan (EAT) and the composite EAT–Lognormal models discussed in this paper preserve key properties of the Exponential model including its capacity to model distributions with zero incomes. This is an important feature as the presence of zeros conditions the modelling of income distributions as it rules out the possibility of using many parametric models commonly used in the literature. Many researchers opt for excluding the zeros from the analysis, however, this may not be a sensible approach especially when the number of zeros is large or if one is interested in accurately describing the lower part of the distribution. We apply the EAT and the EAT–Lognormal models to study the distribution of incomes in Australia for the period 2001–2012. We find that these models in general outperform the Gamma and Exponential models while preserving the capacity of the latter to model zeros.
URI: http://hdl.handle.net/10553/42094
ISSN: 0378-4371
DOI: 10.1016/j.physa.2016.06.047
Source: Physica A: Statistical Mechanics and its Applications [ISSN 0378-4371], v. 461, p. 756-766
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