SSE/EFI Working Paper Series in Economics and Finance
No 279:
Stochastic Dominance Amongst Swedish Income Distributions
Almas Heshmati ()
and Esfandiar Maasoumi ()
Abstract: Sweden's income distribution for the whole population and
for subgroups, including its immigrants, has been extensively studied. The
interest in this area has grown with increasing availability of data,
including panels. The previous studies are based on indices of inequality
or mobility. While indices are useful for complete ordering and have an air
of "decisiveness" about them, they lack universal acceptance of the value
judgements inherent to the welfare functions that underlay all indices. In
contrast, uniform partial order relations are studied in this paper which
rank welfare situations over very wide classes of welfare functions. We
conduct bootstrap tests for the existence of first and second order
stochastic dominance amongst Sweden's income distributions over time and
for several subgroups of immigrants. Analysis of immigrant's income is
motivated by the fact that the development of income for immigrants has
been different and strongly affected by their length of residence and
countries of origin. We consider eleven waves of a panel of incomes in
Sweden. Two income definitions are developed. One is pre-transfers and
taxes gross income, the other is a post-transfers and taxes disposable
income. The comparison of the distribution of these two variables affords a
partial view of Sweden's welfare system. We have focused on the incomes of
Swede's and immigrant groups of single individuals identified by country of
origin, length of residence, age, education, gender, marital status and
other relevant characteristics. We find that first order dominance is rare,
but second order relation holds in several cases.
Keywords: Sweden; Immigrants; Optimal policy; Stochastic Dominance; Lorenz Curves; Bootstrap; Income Distribution; Nonparametric Testing; (follow links to similar papers)
JEL-Codes: D31; D63; O15; (follow links to similar papers)
37 pages, November 6, 1998
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- This paper is published as:
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Heshmati, Almas and Esfandiar Maasoumi, (2000), 'Stochastic Dominance Amongst Swedish Income Distributions', Econometric Reviews, Vol. 19, September, No. 3, pages 287-320
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