Applying Generalized Pareto Curves to Inequality Analysis

Thomas Blanchet (1, 2) , Bertrand Garbinti (3) , Jonathan Goupille-Lebret (4) , Clara Martínez-Toledano (1, 2)

1 PSE - Paris School of Economics
2 PJSE - Paris Jourdan Sciences Economiques
3 Centre de recherche de la Banque de France
4 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne

A generalized Pareto curve is defined as the curve of inverted Pareto coefficients b(p), where b(p) is the ratio between average income or wealth above rank p and the p-th quantile. We present this concept and show how it can be used to better estimate distributions, especially from tax tabulations. By providing a simple decomposition of top shares, we discuss how studying inverted Pareto coefficients can improve the understanding of inequality dynamics. We also show how it helps to better analyze wealth and income concentrations along the distribution, using data for France, Spain, the United States, and China.

Domaines: Economies et finances

Thomas Blanchet, Bertrand Garbinti, Jonathan Goupille-Lebret, Clara Martínez-Toledano. Applying Generalized Pareto Curves to Inequality Analysis. American Economic Review Papers and Proceedings, 2018, 108, pp.114-118. ⟨10.1257/pandp.20181075⟩. ⟨halshs-01902598⟩