Mathematics and Statistics Vol. 7(3), pp. 70 - 77
DOI: 10.13189/ms.2019.070303
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Power Law Behavior and Tail Modeling on Low Income Distribution

Nurulkamal Masseran ^*, Lai Hoi Yee , Muhammad Aslam Mohd Safari , Kamarulzaman Ibrahim
Center for Modeling and Data Science, Faculty of Science and Technology, Universiti Kebangsaan Malaysia, Malaysia

ABSTRACT

Poverty is an important issue that needs to be addressed by all countries. Poverty is related to a group of people earning a low income (lower-tail of the income distribution). In Malaysia, low-income earners are classified as the B40 group. This study aims to describe the behavior of the low-income distribution using the power law model. For this purpose, an inverse Pareto model was applied for describing the lower tail data of Malaysian household income. A robust and efficient estimator, called the probability integral transform statistic estimator, was utilized for estimating the shape parameter of the inverse Pareto distribution. Based on the fitted inverse Pareto model, not all households in the B40 group complied with the power law behavior. However, the power law was able to provide a good description for the group of B40 that was below the poverty line. Based on the inverse Pareto model, the parametric Lorenz curve and the Gini index were derived to provide a robust measure of the income inequality of poor households in Malaysia.

KEYWORDS
Income Distribution, Inequality Indices, Inverse Pareto Model, Robust Estimation

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Nurulkamal Masseran , Lai Hoi Yee , Muhammad Aslam Mohd Safari , Kamarulzaman Ibrahim , "Power Law Behavior and Tail Modeling on Low Income Distribution," Mathematics and Statistics, Vol. 7, No. 3, pp. 70 - 77, 2019. DOI: 10.13189/ms.2019.070303.

(b). APA Format:
Nurulkamal Masseran , Lai Hoi Yee , Muhammad Aslam Mohd Safari , Kamarulzaman Ibrahim (2019). Power Law Behavior and Tail Modeling on Low Income Distribution. Mathematics and Statistics, 7(3), 70 - 77. DOI: 10.13189/ms.2019.070303.