Handbook of applied economic statistics

[...]... Giles, Ph.D Professor, Department of Economics, University of Victoria, Victoria, British Columbia, Canada Amos Golan, Ph.D Visiting Associate Professor, Department of Agricultural and Resource Economics, University of California at Berkeley, Berkeley, California, and Department of Economics, American University, Washington, D.C David A Green, Ph.D Department of Economics, University of British Columbia,... Assistant Professor, Department of Economics, University of California at Riverside, Riverside, California R Robert Russell, Ph.D Professor, Department of Economics, University of Californi a at Riverside, Riverside, Ca1i forni a Mun S Son, Ph.D Associate Professor, Department of Mathematics and Statistics, University of Vermont, Burlington, Vermont CONTRIBUTORS xi Timo Teriisvirta, Ph.D Professor, Department... British Columbia, Canada Ali S Hadi, Ph.D Professor, Department of Statistics, Cornell University, Ithaca, New York George Judge, Ph.D Professor, University of California at Berkeley, Berkeley, Cal- ifornia Walter Kramer, Dr rer pol Professor, Department of Statistics, University of Dortmund, Dortmund, Germany Esfandiar Maasoumi, Ph.D (FRS) Professor, Department of Economics, Southern Methodist University,... Department of Economic Statistics, Stockholm School of Economics, Stockholm, Sweden Olivier Torres, Ph.D Maitre de Conferences, U.F.R MathCmatiques, Sciences kconomiques et Sociales, Universitk de Lille, Villeneuve d’Ascq, France Aman Ullah, Ph.D Professor, Department of Economics, University of California at Riverside, Riverside, California Michael R Veall, Ph.D Professor, Department of Economics,... left blank HANDBOOK OF APPLIED ECONOMIC STATISTICS This page intentionally left blank Economic Statistics and Social Welfare Comparisons A Review lames B Davies University of Western Ontario, London, Ontario, Canada David A Green University of British Columbia, Vancouver; 5rItish Columbia, Canada Harry J Paarsch University oflowa, Iowa Ci& Iowa 1 INTRODUCTION We present a selective survey of the literature... Department of Economics, Southern Methodist University, Dallas, Texas Douglas Miller, Ph.D Assistant Professor, Department of Economics, Iowa State University, Ames, Iowa Harry J Paarsch, Ph.D Associate Professor, Department of Economics, University of Iowa, Iowa City, Iowa Adrian Rodney Pagan, Ph.D Professor, Economics Program, The Australian National University, Canberra, Australia Martin Ravallion, Ph.D... of major changes in the distribution of income Each is completely insensitive, for example, to redistributions of income occurring exclusively in a wide, middle range of incomes 2 Variance of Income A standard measure of scale is the variance of Y , defined by An important characteristic of the variance, which carries through to the related measures like the standard deviation and the coefficient of. .. decomposability of the variance also carries through to convenient decompositions of the standard deviation and the coefficient of variation 3 Standard Deviation of Income A drawback of the variance is that it is in the units squared of income Another measure of scale, which has the same units as the mean, is the standard deviation, which is defined as a = G 4 Coefficient of Variation of Income We now... of the variance, and its related measures, we have seen that the use of a linear scale gives great weight to the right tail of the distribution Applying a logarithmic transformation reduces this effect.* Thus, introducing the transformation 2 = log Y we define the variance of the logarithm of Y by 00 where is the average value of log Y.? Note that the variance of the logarithm of Y is independent of. .. measure of income inequality, which is often employed, is the variance of the logarithm of Y One reason for the frequent use of this index may lie in the popularity of “log-earnings” or “log-income” regressions R2 gives an immediate measure of the proportion of inequality explained by the regressors if the variance of the logarithm of Y is accepted as an appropriate inequality measure, and inequality . Washington Professor, Department of Economics, University of Wash- Jean-Marie Dufour, Ph.D. ences, University of Montreal, Montreal, Quebec, Canada Professor, C.R.D.E. and Department of Economic. Assistant Professor, Department of Economics, University of R. Robert Russell, Ph.D. forni a at Riverside, Riverside, C a1 i forn i a Professor, Department of Economics, University of Cali-. blank HANDBOOK OF APPLIED ECONOMIC STATISTICS This page intentionally left blank Economic Statistics and Social Welfare Comparisons A Review lames B. Davies University of Western