Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195447
Authors: 
Schluter, Christian
Year of Publication: 
2018
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Volume:] 6 [Year:] 2018 [Issue:] 1 [Pages:] 1-16
Abstract: 
In economics, rank-size regressions provide popular estimators of tail exponents of heavy-tailed distributions. We discuss the properties of this approach when the tail of the distribution is regularly varying rather than strictly Pareto. The estimator then over-estimates the true value in the leading parametric income models (so the upper income tail is less heavy than estimated), which leads to test size distortions and undermines inference. For practical work, we propose a sensitivity analysis based on regression diagnostics in order to assess the likely impact of the distortion. The methods are illustrated using data on top incomes in the UK.
Subjects: 
top incomes
heavy tails
rank size regression
extreme value index
regular variation
JEL: 
D31
C13
C14
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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