On the Approximation of Pareto Distribution to Exponential Distribution Using the Gini Coefficient of Inequality
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Date
2017
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Volume Title
Publisher
Edited Conference Proceedings of the 1st International Conference of the Nigeria Statistical Society (NSS).
Abstract
Pareto proposed that income and wealth
distribution obeys a universal power law valid for all times
and countries, but subsequent studies have often disputed this
position. Some even argued there is indeed no Pareto Law
and that it should be entirely discarded in studies on
distribution of wealth or resources. Many other probability
distributions have been proposed such as log normal,
exponential, gamma and two other forms by Pareto himself.
Using data on imported goods from the National Bureau of
Statistics as a case of distribution of wealth in Nigeria, we
demonstrated that the distribution of money spent on
importation in Nigeria also follow exponential distribution
using the Gini coefficient which is a measure of inequality
(degree of concentration) of a variable in the distribution of
resources. Simulation studies were carried out at different
sizes of items (or households) and varying values of the shape
parameter and we compare how close the Gini coefficients of
the exponential distribution approximate those obtained from
the Pareto data as a credible alternative to Pareto
distribution.
Description
Keywords
Pareto distribution,, Gini coefficient,, Exponential distribution., Lorenz curve,