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Dagum Distribution: Definition, CDF & PDF

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The Dagum distribution (also called the Inverse Burr distribution; Dagum called it the generalized logistic-Burr distribution) was proposed by Camilo Dagum in the 1970s to model income and wealth distribution. Dagum developed the models as an alternative to the Pareto Distribution and lognormal distribution, which he felt didn’t result in accurate models when applied to spread of income.

Despite its relative unpopularity, the Dagum distribution often performs better than other two/three parameter income/wealth distribution models when applied to empirical data.

Dagum Distribution CDF and PDF

The CDF of the Type I (three parameter) Dagum distribution is:
dagum distribution

And the PDF is:
pdf

Where:



When Β = 1, the distribution is called the log-logistic distribution.

Types

The three parameter Dagum Type I distribution evolved from Dagum’s experimentation with a shifted log-logistic distribution (Chotikapanich, 2008). Two four-parameter (Type II) generalizations were also developed.

References

Chotikapanich, D. (Ed.) (2008). Modeling Income Distributions and Lorenz Curves. Springer Science & Business Media.
Dagum, C., A New Model of Personal Income Distribution: Specification and Estimation,
Economie Applique’e, 30, 413 – 437, (1977).
Kleiber, C. & Kotz, S. (2003). Statistical Size Distributions in Economics and Actuarial Sciences. John Wiley & Sons.
Atkinson, A. (2014). Handbook of Income Distribution, Volume 2. Elsevier.

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