Interactive Poverty and Affluence of a Society: Change-Point Models for Structural Changes

Abstract

For any society or community, there is ample room for a prismatic view of its income distribution. Conventional measures of income (distributional) inequalities, such as the Gini coefficient, may not depict a realistic picture across the individual sectors of an income distribution. Stratification into poor, middle-class, and affluent sectors generally provides a better understanding of the socioeconomic intricacies of such income distributional inequalities. Combining such component measures into a single index requires careful statistical considerations and entails a detailed analysis of the entire income distributional data. Economic structural changes may occur within each sector and in plausibly rather diverse directions, so that the usual linear models may fail to be very appropriate for a composite analysis. A formulation of a change-point model in a setup of constancy of regression surfaces is therefore incorporated in the development of methodology for studying structural changes for such income distributions. Proper emphasis is placed on nonparametric as well as robustness considerations underlying such a, nonstandard analysis. Such considerations also play a vital role in forecasting of economic structural changes with respect to some income inequalities.