Use of Artificial Neural Network for the Construction of Lorenz Curve

Abstract

Lorenz curve and Gini index are the most widely used measures of income inequality in Economics. Artificial Neural Networks (ANN) are mathematical models that learn complex relationships in data. ANN is widely used for prediction and classification tasks in many fields of knowledge. In this paper, Lorenz points are generated from a trained ANN by systematically varying some underlying parameters of ANN and the behavior of Lorenz curve is studied. It is shown that ANN technique generates better Lorenz curve in the sense of better distribution of income points and having smaller Gini Index. A real life illustration is provided by taking the per capita Net State Domestic Product at current prices for 32 States / Union Territories of India for the period 1997-1998.