Testing for Marginal Changes in Income Distributions with Lorenz and Concentration Curves

Abstract

Asymptotically distribution free statistical tests for comparing absolute and relative Lorenz and concentration curves are provided. The procedures do not require independent samples and can be used to test for marginal changes in income distributions. The tests are illustrated using a large sample of tax returns that have been randomly selected for audit by the Internal Revenue Service. The tests reveal the marginal effects of systematic underreporting of income and tax liabilities on the U.S. income distribution. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.