Statistical inference for Lorenz curves using simulated critical values

Abstract

This paper suggests an improvement in the traditional testing procedure of dominance relations associated with empirical Lorenz curves and their generalizations. This improvement is based on simulating the asymptotic distribution of the test statistic. The simulation approach asymptotically dominates the traditional approach since the traditional method for calculating critical values establishes an upper bound for the simulated critical value. A gain in power is demonstrated in the empirical part of the paper dealing with the evolution of the distribution of disposable income in Finland between 1971 and 1994.