Modeling urban household income in Malaysia using parametric approach

Abstract

The parametric approach is commonly used to estimate the actual distribution and thus measure income inequalities while analyzing the income distribution. The parametric estimate of the income distribution is useful as it helps in inferences about the estimated inequalities to be made more easily. Centered on household income survey data from 2007, 2009, 2012, and 2014, a comparative assessment of six parametric distribution candidates that represent urban household income in Malaysia was conducted in this research. The gamma, lognormal, Weibull, Dagum, Singh – Maddala, and generalized beta of the second kind distributions were some of the two, three, and four parameters considered in this study. Based on our analysis, it was found that the generalized beta of second kind distribution was the most adequate model for explaining the urban household incomes in Malaysia. Then, on the basis of the generalized beta of second kind distribution, income inequality analysis of the urban households in Malaysia was assessed using Lorenz curve and Gini coefficient.