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Abstract:

DARP Paper
Welfare Judgements in the Presence Contaminated Data, (published in Econometrica, vol. 70 (2002), pp. 1221-1233)
Frank A Cowell and Maria-Pia Victoria-Feser January 1996
Paper No' DARP 013:


Tags: welfare dominance; lorenz curve; robustness

The economic analysis of income distribution and related topics makes extensive use of dominance criteria to draw inferences about welfare comparisons. However it is possible that - just as some inequality statistics can be very sensitive to extreme values - conclusions drawn from empirical implementations of dominance criteria may also be influenced by data contamination. We show the conditions under which this may occur and propose empirical methods to work round the problem.