The Journal of Economic Inequality

, Volume 5, Issue 1, pp 21–37 | Cite as

Robust stochastic dominance: A semi-parametric approach

  • Frank A. Cowell
  • Maria-Pia Victoria-FeserEmail author


Lorenz curves and second-order dominance criteria, the fundamental tools for stochastic dominance, are known to be sensitive to data contamination in the tails of the distribution. We propose two ways of dealing with the problem: (1) Estimate Lorenz curves using parametric models and (2) combine empirical estimation with a parametric (robust) estimation of the upper tail of the distribution using the Pareto model. Approach (2) is preferred because of its flexibility. Using simulations we show the dramatic effect of a few contaminated data on the Lorenz ranking and the performance of the robust semi-parametric approach (2). Since estimation is only a first step for statistical inference and since semi-parametric models are not straightforward to handle, we also derive asymptotic covariance matrices for our semi-parametric estimators.

Key words

Lorenz curve M-estimators Pareto model welfare dominance 


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Copyright information

© Springer Science + Business Media B.V. 2006

Authors and Affiliations

  1. 1.London School of EconomicsLondonUK
  2. 2.HECUniversité de GeneveGeneve 4Switzerland

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