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Poverty, income distribution and CGE micro-simulation modeling: Does the functional form of distribution matter?

An Erratum to this article was published on 29 March 2008


This paper explores income distribution modeling approaches for poverty analysis in a CGE micro-simulation context. Income distribution functional forms such as the lognormal, Pareto, beta distribution and empirical methods are currently used in CGE models in parallel with the estimation of FGT poverty indices. The particular methods or functional forms used in this context are not always clearly defined and justified. In this paper, we investigate and provide better criteria for selecting a functional distribution for poverty analysis. To achieve this, we apply parametric estimation to seven functional forms and compare the results to a purely “empirical” method. The results showed that no single form is more appropriate in all instances or for all household subgroups. The choice of a modeling approach should be motivated by a search for best fit and should be based on appropriate statistical tests. Selecting inappropriate distributional forms can lead to biased results in terms of poverty analysis. Introducing functional forms in the empirical approach can also provide greater confidence in the results obtained.

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other urban educated


other-urban non-educated


basic needs


cumulative density function


constant elasticity of substitution


constant elasticity of transformation


computable general equilibrium




distributive analysis – analyse distributive




Dakar educated


Dakar non-educated


nominal exchange rate


empirical distribution function


enquête sénégalaise auprès des ménages


Foster, Greer and Thorbecke




displaced lognormal


Organization for Economic Co-operation and Development


probability density function


rental rate of capital


rural educated


rural non-educated


skilled wages;


sum of absolute errors


social accounting matrix


government savings;




unskilled wages;


sum of squared errors


Government income


total household income;




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Correspondence to Luc Savard.

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Boccanfuso, D., Decaluwé, B. & Savard, L. Poverty, income distribution and CGE micro-simulation modeling: Does the functional form of distribution matter?. J Econ Inequal 6, 149–184 (2008).

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  • Computable general equilibrium models
  • Estimation
  • Measurement and poverty analysis
  • Personal income and wealth distribution

JEL Classification

  • I32
  • D31
  • C13
  • C68