Power law behavior and tail modeling on low income distribution

Nurulkamal Masseran, Lai Hoi Yee, Muhammad Aslam Mohd Safari, Kamarulzaman Ibrahim

Research output: Contribution to journalArticle

Abstract

Poverty is an important issue that needs to be addressed by all countries. Poverty is related to a group of people earning a low income (lower-tail of the income distribution). In Malaysia, low-income earners are classified as the B40 group. This study aims to describe the behavior of the low-income distribution using the power law model. For this purpose, an inverse Pareto model was applied for describing the lower tail data of Malaysian household income. A robust and efficient estimator, called the probability integral transform statistic estimator, was utilized for estimating the shape parameter of the inverse Pareto distribution. Based on the fitted inverse Pareto model, not all households in the B40 group complied with the power law behavior. However, the power law was able to provide a good description for the group of B40 that was below the poverty line. Based on the inverse Pareto model, the parametric Lorenz curve and the Gini index were derived to provide a robust measure of the income inequality of poor households in Malaysia.

Original languageEnglish
Pages (from-to)70-77
Number of pages8
JournalMathematics and Statistics
Volume7
Issue number3
DOIs
Publication statusPublished - 1 Jul 2019

Fingerprint

Income Distribution
Poverty
Tail
Power Law
Pareto
Malaysia
Modeling
Gini Index
Lorenz Curve
Parametric Curves
Pareto Distribution
Efficient Estimator
Robust Estimators
Shape Parameter
Integral Transform
Model
Statistic
Estimator
Low income
Income distribution

Keywords

  • Income distribution
  • Inequality indices
  • Inverse pareto model
  • Robust estimation

ASJC Scopus subject areas

  • Statistics, Probability and Uncertainty
  • Statistics and Probability
  • Economics and Econometrics

Cite this

Power law behavior and tail modeling on low income distribution. / Masseran, Nurulkamal; Yee, Lai Hoi; Safari, Muhammad Aslam Mohd; Ibrahim, Kamarulzaman.

In: Mathematics and Statistics, Vol. 7, No. 3, 01.07.2019, p. 70-77.

Research output: Contribution to journalArticle

Masseran, Nurulkamal ; Yee, Lai Hoi ; Safari, Muhammad Aslam Mohd ; Ibrahim, Kamarulzaman. / Power law behavior and tail modeling on low income distribution. In: Mathematics and Statistics. 2019 ; Vol. 7, No. 3. pp. 70-77.
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