Approximating Income Distribution Dynamics Using Aggregate Data

Approximating Income Distribution Dynamics Using Aggregate Data

This paper proposes a methodology to approximate individual income distribution dynamics using only time series data on aggregate moments of the income distribution. Under the assumption that individual incomes follow a lognormal autoregressive pro...

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Bibliographic Details
Main Authors: Kraay, Aart, Van der Weide, Roy
Format: Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2017
Subjects:
INCOME DISTRIBUTION
INEQUALITY
MOBILITY
POVERTY
BOTTOM 40 PERCENT
Online Access:http://documents.worldbank.org/curated/en/807641498574886507/Approximating-income-distribution-dynamics-using-aggregate-data
http://hdl.handle.net/10986/27626
id okr-10986-27626
recordtype oai_dc
spelling okr-10986-276262021-06-08T14:42:47Z Approximating Income Distribution Dynamics Using Aggregate Data Kraay, Aart Van der Weide, Roy INCOME DISTRIBUTION INEQUALITY MOBILITY POVERTY BOTTOM 40 PERCENT This paper proposes a methodology to approximate individual income distribution dynamics using only time series data on aggregate moments of the income distribution. Under the assumption that individual incomes follow a lognormal autoregressive process, this paper shows that the evolution over time of the mean and standard deviation of log income across individuals provides sufficient information to place upper and lower bounds on the degree of mobility in the income distribution. The paper demonstrates that these bounds are reasonably informative, using the U.S. Panel Study of Income Dynamics where the panel structure of the data allows us to compare measures of mobility directly estimated from the micro data with approximations based only on aggregate data. Bounds on mobility are estimated for a large cross-section of countries, using data on aggregate moments of the income distribution available in the World Wealth and Income Database and the World Bank's PovcalNet database. The estimated bounds on mobility imply that conventional anonymous growth rates of the bottom 40 percent (top 10 percent) that do not account for mobility substantially understate (overstate) the expected growth performance of those initially in the bottom 40 percent (top 10 percent). 2017-07-18T22:33:25Z 2017-07-18T22:33:25Z 2017-06 Working Paper http://documents.worldbank.org/curated/en/807641498574886507/Approximating-income-distribution-dynamics-using-aggregate-data http://hdl.handle.net/10986/27626 English en_US Policy Research Working Paper;No. 8123 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic INCOME DISTRIBUTION
INEQUALITY
MOBILITY
POVERTY
BOTTOM 40 PERCENT
spellingShingle INCOME DISTRIBUTION
INEQUALITY
MOBILITY
POVERTY
BOTTOM 40 PERCENT
Kraay, Aart
Van der Weide, Roy
Approximating Income Distribution Dynamics Using Aggregate Data
relation Policy Research Working Paper;No. 8123
description This paper proposes a methodology to approximate individual income distribution dynamics using only time series data on aggregate moments of the income distribution. Under the assumption that individual incomes follow a lognormal autoregressive process, this paper shows that the evolution over time of the mean and standard deviation of log income across individuals provides sufficient information to place upper and lower bounds on the degree of mobility in the income distribution. The paper demonstrates that these bounds are reasonably informative, using the U.S. Panel Study of Income Dynamics where the panel structure of the data allows us to compare measures of mobility directly estimated from the micro data with approximations based only on aggregate data. Bounds on mobility are estimated for a large cross-section of countries, using data on aggregate moments of the income distribution available in the World Wealth and Income Database and the World Bank's PovcalNet database. The estimated bounds on mobility imply that conventional anonymous growth rates of the bottom 40 percent (top 10 percent) that do not account for mobility substantially understate (overstate) the expected growth performance of those initially in the bottom 40 percent (top 10 percent).
format Working Paper
author Kraay, Aart
Van der Weide, Roy
author_facet Kraay, Aart
Van der Weide, Roy
author_sort Kraay, Aart
title Approximating Income Distribution Dynamics Using Aggregate Data
title_short Approximating Income Distribution Dynamics Using Aggregate Data
title_full Approximating Income Distribution Dynamics Using Aggregate Data
title_fullStr Approximating Income Distribution Dynamics Using Aggregate Data
title_full_unstemmed Approximating Income Distribution Dynamics Using Aggregate Data
title_sort approximating income distribution dynamics using aggregate data
publisher World Bank, Washington, DC
publishDate 2017
url http://documents.worldbank.org/curated/en/807641498574886507/Approximating-income-distribution-dynamics-using-aggregate-data
http://hdl.handle.net/10986/27626
_version_ 1764465510580224000

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