Journal Article

Modeling Income Data via New Parametric Quantile Regressions: Formulation, Computational Statistics, and Application

Saulo, Helton, Marchant, Carolina, Leiva, Víctor, Bourguignon, Marcelo, Borges, Giovanna V., Vila, Roberto

2023

Overview

Income modeling is crucial in determining workers’ earnings and is an important research topic in labor economics. Traditional regressions based on normal distributions are statistical models widely applied. However, income data have an asymmetric behavior and are best modeled by non-normal distributions. The objective of this work is to propose parametric quantile regressions based on two asymmetric income distributions: Dagum and Singh–Maddala. The proposed quantile regression models are based on reparameterizations of the original distributions by inserting a quantile parameter. We present the reparameterizations, properties of the distributions, and the quantile regression models with their inferential aspects. We proceed with Monte Carlo simulation studies, considering the performance evaluation of the maximum likelihood estimation and an analysis of the empirical distribution of two types of residuals. The Monte Carlo results show that both models meet the expected outcomes. We apply the proposed quantile regression models to a household income data set provided by the National Institute of Statistics of Chile. We show that both proposed models have good performance in model fitting. Thus, we conclude that the obtained results favor the Singh–Maddala and Dagum quantile regression models for positive asymmetrically distributed data related to incomes. The economic implications of our investigation are discussed in the final section. Hence, our proposal can be a valuable addition to the tool-kit of applied statisticians and econometricians.

• Publisher: MDPI AG
• Subject: Birnbaum–Saunders distribution / Dagum distribution / Economic models / Empirical analysis / fractile regression / Income / income data and distributions / Income distribution / Kurtosis / Labor economics / Maximum likelihood estimation / Monte Carlo simulation / Performance evaluation / Random variables / Regression models / Singh–Maddala distribution / Skewed distributions / Skewness / Statistical analysis / Statistical models / statistical reparameterizations