Entropy Based China Income Distributions and Inequality Measures

24 Pages Posted: 11 Feb 2018

See all articles by Sofia Berto Villas-Boas

Sofia Berto Villas-Boas

University of California, Berkeley - Agricultural & Resource Economics

Quizi Fu

University of California, Berkeley

George Judge

University of California, Berkeley - Department of Agricultural & Resource Economics

Date Written: January 30, 2018

Abstract

We use entropy based methods on a sample of household income data from the 2005 Chinese Inter-Census as a basis for summarizing the income data in the form of a probability density function(PDF), and to obtain measures of income inequality. We estimate the income probability density functions using information theoretic entropy based divergence measures and recover the corresponding inequality measures for each of China’s provinces. In the entropy criterion-measure we seek a probability density function solution that is as close to a uniform PDF-distribution of income (an equal distribution with the least inequality), as the micro sample data will permit. These entropy measures reflect cross sectional measures of income inequality and reflect how the province level economic behavioral system is functioning and how the allocation and distribution systems is performing. Finally we use a sample of data from the China Family Panel Study to recover an estimate of the income PDF for China in 2016.

Keywords: Income Probability Distribution Function, Micro Income Data, Information Theoretic Methods, Cressie-Read Divergence, Entropy Maximization, Pareto’s Law

JEL Classification: D31, E21, C1, C10, C24

Suggested Citation

Villas-Boas, Sofia and Fu, Quizi and Judge, George G., Entropy Based China Income Distributions and Inequality Measures (January 30, 2018). Available at SSRN: https://ssrn.com/abstract=3114382 or http://dx.doi.org/10.2139/ssrn.3114382

Sofia Villas-Boas (Contact Author)

University of California, Berkeley - Agricultural & Resource Economics ( email )

310 Giannini Hall # 3310
Berkeley, CA 94720
United States
510-643-6359 (Phone)
510-643-8911 (Fax)

Quizi Fu

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

George G. Judge

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

207 Giannini Hall
University of California
Berkeley, CA 94720
United States

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