Pareto-Lognormal Income Distributions:Inequality and Poverty Measures, Estimation and Performance

The (double) Pareto-lognormal is an emerging parametric distribution for income that has a sound underlying generating process, good theoretical properties, and favourable evidence of its fit to data. We extend existing results for this distribution in 3 directions. We derive closed form formula for its moment distribution functions, and for various inequality and poverty measures. We show how it can be estimated from grouped data using the GMM method developed in Hajargasht et al. (2012). Using grouped data from ten countries, we compare its performance with that of another leading 4-parameter income distribution, the generalized beta-2 distribution. The results confirm that both distributions provide a good fit, with the double Pareto-lognormal distribution outperforming the beta distribution in some but not all cases.