Benford’s law and the FSD distribution of economic behavioral micro data

Abstract

In this paper, we focus on the first significant digit (FSD) distribution of European micro income data and use information theoretic-entropy based methods to investigate the degree to which Benford’s FSD law is consistent with the nature of these economic behavioral systems. We demonstrate that Benford’s law is not an empirical phenomenon that occurs only in important distributions in physical statistics, but that it also arises in self-organizing dynamic economic behavioral systems. The empirical likelihood member of the minimum divergence-entropy family, is used to recover country based income FSD probability density functions and to demonstrate the implications of using a Benford prior reference distribution in economic behavioral system information recovery.