Pareto and Generalized Pareto Distributions

Abstract

More than one hundred years after its introduction, Pareto's proposed model for fitting income distributions continues to be heavily used. A variety of generalizations of this model have been proposed including discrete versions, together with natural multivariate extensions. Several stochastic scenarios can be used to justify the prevalence of income distributions exhibiting approximate Paretian behavior. This chapter will provide a survey of results related to these Pareto-like models including discussion of related distributional and inferential questions. Topics will include the classical Pareto models and its generalizations, stochastic income models leading to Paretian income distributions, distributional properties of generalized Pareto distributions, related discrete distributions, inequality measures for Paretian models, inferential issues and multivariate extensions.