Statistical problems in modelling personal income distributions include estimation procedures, testing and model choice. Typically, the parameters of a given model are estimated by classical procedures such as maximum likelihood and least squares estimators. Unfortunately, the classical methods...

We examine the sensitivity of estimates and inequality indices to extreme values, in the sense of their robustness properties and of their statistical performance. We establish that these measures are very sensitive to the properties of the income distribution. Estimation and inference can be...