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Nonparametric methods for comparing distribution functionals for dependent samples with application to inequality measures
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This paper proposes asymptotically distribution-free inference methods for comparing a broad range of welfare indices across dependent samples, including those employed in inequality, poverty, and risk analysis. Two distinct situations are considered. First, we propose asymptotic and bootstrap intersection methods which are completely robust to arbitrary dependence between two samples. Second, we focus on the common case of overlapping samples -- a special form of dependent samples where sample dependence arises solely from matched pairs -- and provide asymptotic and bootstrap methods for comparing indices. We derive consistent estimates for asymptotic variances using the influence function approach. The performance of the proposed methods is studied in a simulation experiment: we find that confidence intervals with overlapping samples exhibit satisfactory coverage rates with reasonable precision, whereas conventional methods based on an assumption of independent samples have an inferior performance in terms of coverage rates and interval widths. Asymptotic inference can be less reliable when dealing with heavy-tailed distributions, while the bootstrap method provides a viable remedy, unless the variance is substantial or nonexistent. The intersection method yields reliable results with arbitrary dependent samples, including instances where overlapping samples are not feasible. We demonstrate the practical applicability of our proposed methods in analyzing dynamic changes in household financial inequality in Italy over time.
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Keywords: inequality measures; poverty measures; influence function; asymptotic; intersection method; bootstrap; confidence interval; overlapping samples; dependent samples.
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Journal of Economic Literature\ classification: C01, C1, C12, C14, C15D6, D63, G5, I3, I32.
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Researchers often seek to compare inequality levels across different areas or over time. In practice, inequality measures are estimated from samples, making it essential to investigate the robustness of these comparisons through statistical inference. However, most inference procedures assume either independence between samples or complete dependence (matched pairs of observations), as detailed in \nocite*{Mills1997}, \nocite*{Cowell2015}, \nocite* {Dufour-Flachaire-Khalaf(2019)}, \nocite*{Dufour2023b}, \nocite*{Ibragimov2025}, and references therein.
However, much of the income data is dependent on the fact that there is an overlap of data between the two samples. The overlap refers to paired observations, such as the incomes of the same household interviewed in two consecutive periods. For instance, labor force surveys in many countries are, by design, rotated panel data. Other examples include the Current Population Survey (CPS), the Panel Study of Income Dynamics (PSID), and the Consumer Expenditure Survey (CEX) for U.S. income data. In this paper, we utilize the Survey of Household and Income Wealth (SHIW) from Italy, featuring an overlap between consecutive waves. Two issues emerge when using such data: first, some individual income observations are correlated across periods; second, income data for some units in one of the periods is missing.
Several studies have provided inference procedures with overlapping samples. \nocite*{Zheng2001} proposed an asymptotic method for comparing interpolated Gini indices and generalized entropy measures+. \nocite*{Zheng2004} extends results to the Foster-Greer-Thorbecke poverty measure. \nocite* {Biewen2002} presented a percentile bootstrap for comparing indices in a family which are smooth functions of population moments. The above studies focus on specific measurements and do not cover the popular Gini index and quantile-based measurements, such as the Lorenz curve. Moreover, some indices are covered by only one of the two methods (i.e., the asymptotic and bootstrap methods).
In this paper, we provide inference procedures for a broad class of inequality, poverty, and welfare measures within a unified framework. We focus on estimators in the form of asymptotically linear Gaussian functionals (defined below) previously considered in \nocite*[henceforth DFK] {Dufour-Flachaire-Khalaf(2019)}. Nevertheless, we differ from DFK in two central ways. First, DFK focus on hypothesis tests based on permutation methods, while this is not the case here. Second, DFK assume independent samples, while we allow dependent samples.
Nevertheless, we do not have such a restriction. So, we can study a broader family of indices, including quantile-based measurements such as the Lorenz curve.
Our methods are closely related to the literature on influence functions (IF), dating back to \nocite*{Hampel1974}. As one of the earliest applications in econometrics, \nocite*{Cowell1996} investigated the robustness of various inequality measurements. In contrast, we employ the IF to derive the asymptotic distribution and estimate the asymptotic variance with great computational advantage; see, for example, \nocite*{Cowell2015}. Furthermore, this paper extends the estimation of asymptotic variances to dependent samples. We make the following contributions.
First, we focus on a wide range of indices covering most inequality, poverty, and risk analysis measurements, including the well-known Gini index and Lorenz curve.
Second, we develop methods applicable without any assumption on the dependence between the compared samples. This is done by using the intersection approach previously considered by \nocite*{Dufour1998} in a finite-sample framework. We introduce asymptotic and bootstrap intersection methods (IMs) for assessing changes in indices. These methods utilize information within each sample and handle arbitrary dependence between two samples. Furthermore, our method provides solutions to a generalized Behrens-Fisher problem, which involves comparing the means of two distributions with arbitrary dependence across the two samples.
Third, we examine overlapping samples, a specific form of dependent samples where sample dependence arises solely from overlap (i.e., matched pairs). Such a framework is applicable to split or rotating panels in survey data. We propose asymptotic and bootstrap inference for index differences, and we present a consistent and numerically positive (definite) estimator for the asymptotic variance.
Fourth, we conduct a series of simulation experiments to examine the performance of the proposed methods. Our confidence intervals based on overlapping samples have coverage rates close to the nominal level with reasonable widths. By contrast, conventional inference -- which ignores sample dependence -- can fail to adequately cover the actual value sufficiently frequently or become overly conservative with large widths. We then analyze the impacts of heavy tails and find that the asymptotic inference performs well for realistic distributions but poorly for distributions with heavy tails. The bootstrap method can alleviate this issue, except when the variance is substantial or nonexistent. Wed show that intersection methods can yield reliable results in all scenarios, particularly when overlapping samples are not fulfilled, and can be reasonably efficient in some instances, such as extremely heavy-tailed distributions.
Fifth, we apply the proposed methods to investigate the dynamic change of financial inequality from 2012 to 2014. The results reveal distinct patterns of internal inequality within the two regions, highlighting the practical importance of negative values in inequality measurement.
The paper is organized as follows. Section (ref) reviews some commonly used inequality measures which are asymptotic linear. Section (ref) describes inference based on intersection methods. Section (ref) discusses the special case of overlapping samples. We assess the performance of the proposed procedures through Monte Carlo experiments in Section (ref). In Section (ref), we apply the methods to analyze the dynamic change in household financial inequality in Italy. We briefly discuss the extensions to clustered data to broaden the scope of our analysis in Section (ref). The paper concludes in Section (ref). All the proofs are given in the appendix.
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To extend existing results to a more general form of welfare indices, we focus on the class of asymptotically linear functionals as defined below. Such a collection of parameters encompasses many welfare measurements, allowing us to present the asymptotic distribution conveniently.
To facilitate our discussion, we introduce some notation. Let $F\in \mathcal{ F}$ be a cumulative distribution function (CDF), and ${\Greekmath 0112} :\mathcal{F} \rightarrow \mathbb{R}$ a functional of distribution $F$. For a sample $ \{X_{i}\}_{i=1}^{n}$, we denote by $\hat{F}$ the empirical distribution function (EDF) for $F$, and estimate ${\Greekmath 0112} (F)$ by ${\Greekmath 0112} (\hat{F})$. We denote by $o_{p}(1)$ a variable which converges (in probability) to zero as $ n\rightarrow \infty $. Let $X_{n}\overset{d}{\longrightarrow }X$ be a sequence of variables $X_{n}$ convergence in distribution to $X$. We consider a random sample of independent and identically distributed (iid) observations $\{X_{i}\}_{i=1}^{n}$ drawn from the distribution $F$, written as $\{X_{i}\}_{i=1}^{n}\overset{iid}{\sim }F$. We now define asymptotically linear Gaussian (ALG) functionals.
In many cases, the function ${\Greekmath 0120} $ in (ref) turns out to be the (asymptotic) influence function (IF) of the estimator ${\Greekmath 0112} (\hat{F})$, which is defined as follows:
where ${\Greekmath 010E} _{x}$ denotes a point mass at $x$. The IF has been widely used to analyze the robustness of an estimator, as it quantifies the effect on an estimator when a single data point in the sample is contaminated; see \nocite* {Wasserman2006} for further details. On the other hand, we utilize the IF as a convenient device to derive asymptotic distributions, especially the asymptotic covariance matrices.
Definition (ref) relies on a high-level condition, but in practice we often impose more primitive assumptions. Table (ref) lists various ALG estimators for several popular indices. For illustrative purposes, we provide examples of the Gini index and the Lorenz curve (LC) below, whose sufficient conditions are provided in the referenced papers.
There are often multiple ways to establish the ALG form in (ref). For instance, using the delta method, \nocite*{Davidson2009} showed that the Gini index is an ALG functional. However, one can also achieve results by using more advanced techniques, such as empirical process theory [\nocite* {Davidson2010a}]. Likewise, the S-Gini [\nocite*{Donaldson1980}] and E-Gini [ \nocite*{Chakravarty1988}], which are two popular extensions of the Gini index, satisfy Definition (ref) using either the delta method [\nocite* {Davidson2010a}] or empirical process theory [\nocite*{Barrett2009}]. In this paper, we only assume the existence of an ALG form as defined in Definition (ref), thereby avoiding various complex conditions.
One merit of the ALG functional in Definition (ref) is its computational efficiency in calculating estimators for the asymptotic variances of the indices. Specifically, we can estimate the asymptotic variance by its sample analog:
where $\hat{F}$ denotes the EDF and ${\Greekmath 0120} $ is given in (ref). \nocite* {Barrett2009} has validated the consistency of $\hat{{\Greekmath 011B} }^{2}$; see section (ref) for a more general scenario.
In the next two sections, we derive asymptotic inference methods for index differences under dependent samples, when both sample sizes go to infinity. In section (ref), we consider generic dependent samples, where we impose no restrictions on the dependence between the two samples or the joint limiting distribution (if it exists). Our proposed inference method is therefore applicable and robust to a wide range of scenarios. Then, in section (ref), we delve consider a more specific data structure called overlapping samples, where the dependence arises from matched pairs.
We use the following notation. For distribution $F_{k}$, $k=1,2$, we estimate the index ${\Greekmath 0112} _{k}={\Greekmath 0112} _{k}(F_{k})$ by $\hat{{\Greekmath 0112} } _{k}={\Greekmath 0112} (\hat{F}_{k})$, where $\hat{F}_{k}$ is the EDF for $F_{k} $ based on $\{X_{ki}\}_{i=1}^{n_{k}}$. We denote $\Delta \hat{{\Greekmath 0112} }=\hat{ {\Greekmath 0112} }_{1}-\hat{{\Greekmath 0112} }_{2}$ the estimate of the indices difference $ \Delta {\Greekmath 0112} ={\Greekmath 0112} _{1}-{\Greekmath 0112} _{2}$. We wish to make inference on $ \Delta {\Greekmath 0112} $. This problem is a nonparametric version of the Behrens -Fisher problem, which involves comparing means of potentially distinct distributions [\nocite*[p 846]{Lehmann2022}]. We will also consider the possibility of dependence between the two samples.
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We start with the generic dependent samples, where the observations in one sample may not be independent of those of the other sample. For simplicity, the observations inside each sample are assumed to be independent and identically distributed (iid). However, it is straightforward to extend results to clustered data using techniques by \nocite*{Zheng2002}, \nocite* {Bhattacharya2007}, and \nocite*{Ibragimov2025}.
Assumption (ref) only focuses on individual samples $ \{X_{1i}\}_{i=1}^{n_{1}}$ and $\{X_{2i}\}_{i=1}^{n_{2}}$, allowing arbitrary forms of dependence between the two samples. The generality of this assumption will be more apparent when we introduce overlapping samples in the subsequent section.
As mentioned in (ref), $\hat{{\Greekmath 011B} }_{k}$ is a consistent estimator for the asymptotic variance of the ALG functional $\hat{ {\Greekmath 0112} }_{k}$, where
Let $q_{p}$ be the $p$-th quantile of the standard Gaussian distribution. We then have the following asymptotic confidence interval (CI) for ${\Greekmath 0112} _{k}$ at level $(1-{\Greekmath 010B} _{k})$, denoted by $\left[ L_{n_{k}},U_{n_{k}}\right] $, where
The limiting confidence coefficient is defined as $\lim_{n_{k}\rightarrow \infty }\inf_{{\Greekmath 0112} _{k}\in \Theta _{k}}\Pr_{{\Greekmath 0112} _{k}}\left( L_{n_{k}}\leq {\Greekmath 0112} _{k}\leq U_{n_{k}}\right) $, provided the limit exists ( \nocite*[p 526]{Lehmann2022}).
We propose an asymptotic version of the intersection method (IM) for $ \Delta{\Greekmath 0112}$, adapted from \nocite*{Dufour2024d}, who extends results in \nocite* {Dufour1998} to finite-sample inference.
There are several ways to construct a bootstrap CI for ${\Greekmath 0112} _{k}$, $k=1,2$ . One good choice, at least in theory, is the Studentized bootstrap, or percentile-t, CI [\nocite*{Hall1992}]. The procedure is as follows [\nocite* {Davidson2004}].
Ideally, the number of bootstrap samples $B$ should be reasonably large and satisfy the condition that ${\Greekmath 010B} (B + 1)$ is an integer for any test level ${\Greekmath 010B}$ [\nocite*{Davidson2000a}]. We then propose a bootstrap version of the intersection method for $\Delta{\Greekmath 0112}$.
Intersection methods (IMs) are asymptotically conservative, which is as expected due to the trade-off between efficiency and robustness. Recall that the IMs do not require any information on sample dependence or the limiting joint distribution of estimators. The following section will demonstrate how to achieve more efficient inference methods under additional assumptions.
In this section, we focus on a special type of sample known as overlapping samples (OS), which accommodate sample dependence that stems exclusively from the overlap (i.e., matched pairs). Such a data structure can be employed for rotating or splitting panels in survey data. Several authors, including \nocite*{Zheng2001}, \nocite*{Zheng2004}, and \nocite*{Biewen2002}, have investigated overlapping samples in their analyses of inequality and poverty and proposed inference methods for specific indices. We describe the OS as follows.
Condition {$($A1$)$} assumes that the first $m$ observations in each sample are matched pairs. Furthermore, it implicitly requires that we know which two observations in each sample form a pair. For instance, when comparing income difference between parents and children, the incomes of a parent and a child from the same family make up a pair. If the pairing information is lost, so that it is unclear whether or not the child and parent come from the same household, then such samples will violate {$($ A1$)$}.
Condition {$($A2$)$} makes the common assumption that pairs of data are iid observations from a fixed unknown joint distribution $\widetilde{F}$ . We may relax such a condition to independent but not identically distributed.
Condition {$($A3$)$} imposes independence between unmatched data and entire observations in the other sample, indicating that the overlap is the only source of dependence between the two samples.
Condition {$($A4$)$} clarify what we mean by asymptotic in OS. First, while both $n_{1}$ and $n_{2}$ go to infinity, the size of overlap $m$ can be zero or a fixed number, giving ${\Greekmath 0115} _{1}={\Greekmath 0115} _{2}=0$. Second, $n_{1}$ and $n_{2}$ can increase to infinity at different orders of speed such that ${\Greekmath 0111} _{1}=0$ or ${\Greekmath 0111} _{1}=1$ (and ${\Greekmath 0115} _{1}={\Greekmath 0115} _{2}=0$ ). So, we do not view {$($A4$)$} as a limitation; also see the discussion following the Proposition (ref).
To complete Assumption (ref), we make an asymptotic normality assumption on matched pairs.
Condition (ref) is technically necessary because Gaussian marginal distributions do not imply a multivariate normal distribution. In practice, however, this assumption is often satisfied for many indices in Table (ref) under the conditions of Assumption (ref). Specifically, $\left\{ ({\Greekmath 0120} _{1}(X_{1i}),{\Greekmath 0120} _{2}(X_{2i}))\right\} _{i=1}^{m}$ are often iid random vectors. Then, by the standard Central Limit Theorem, the sample average has bivariate normal asymptotic distribution.
We first provide the asymptotic distribution of the estimator for the index difference $\Delta \hat{{\Greekmath 0112}}$ with overlapping samples.
The last term of the asymptotic variance in (ref) indicates that the impact of sample dependency relies on both the overlap portions (i.e., ${\Greekmath 0115} _{1}{\Greekmath 0115} _{2}$) and the covariance between ${\Greekmath 0120} _{1}$ and ${\Greekmath 0120} _{2}$. Note that ${\Greekmath 0120} _{k}$ is often a non-monotonic transformation; see Example (ref) and (ref). So it is challenging to predict the value or even the sign of ${\Greekmath 011B} _{12}$ based on $\mathrm{Cov}(X_{1},X_{2})$. We will revisit this issue in the simulation experiments.
Assumption (ref) allows extremely unbalanced samples (where ${\Greekmath 0111} _{1}=0$ or $1$). Take ${\Greekmath 0111} _{1}=1$ as an example. We then have ${\Greekmath 0115} _{1}={\Greekmath 0115} _{2}=0$, $N\approx n_{2}\rightarrow \infty $, and ${\Greekmath 011B} _{\Delta }^{2}={\Greekmath 011B} _{2}^{2}$, indicating $\hat{{\Greekmath 0112}}_{2}$ as the only source of uncertainty. One way to interpret these results is that the sample size $n_{1}$ is so much larger than $n_{2}$ that the uncertainty of $\hat{ {\Greekmath 0112}}_{2}$ dominates that of $\hat{{\Greekmath 0112}}_{1}$. In other words, we can treat $\{X_{1i}\}_{i=1}^{n_{1}}$ as the population and $\hat{{\Greekmath 0112}}_{1}$ as the true parameter ${\Greekmath 0112} _{1}$ (without sampling errors).
We now apply the above proposition to obtain an asymptotic distribution for estimates of differences in Gini indices and LC ordinates.
To conduct inference on changes in indices, we need a consistent estimator for the asymptotic variance. We introduce further notation to simplify our discussion. Given distributions $F_{k}$ with $k=1,2$, we denote ${\Greekmath 0120} _{k}(x):={\Greekmath 0120} (x;{\Greekmath 0112} ,F_{k})$ and $\hat{{\Greekmath 0120} }_{n_{k}}(x):={\Greekmath 0120} (x;{\Greekmath 0112} ,\hat{F}_{n_{k}})$ when no confusion arises. The subscript $n_{k}$ indicates that the estimated functionals is based on sample $\{X_{i}\}_{i=1}^{n_{k}}$. Similarly, we abbreviate $h_{k}$ and $\hat{h}_{n_{k}}$ as discussed in section (ref). So, the estimate $\hat{{\Greekmath 011B} }_{k}^{2}$ in (ref) will take the following form.
Given the expression (ref), one can estimate the asymptotic variance by
where $\hat{{\Greekmath 011B}}_{k}^{2}$ for $k=1,2$, is given in (ref), and $\hat{{\Greekmath 011B}}_{12}$ represents the sample covariance of the matched pairs $\{(\hat{{\Greekmath 0120}}_{m}(X_{1i}),\hat{{\Greekmath 0120}} _{m}(X_{2i}))\}_{i=1}^{m}$. Indeed, several studies, including \nocite* {Zheng2001} and \nocite*{Zheng2004}, have proposed this type of estimator. However, the estimator $\widetilde{{\Greekmath 011B} }_{\Delta }^{2}$ in (ref) is not guaranteed to be positive (or positive definite for a matrix). Consider an example where $n_{1}=n_{2}=2m$, then $ \widetilde{{\Greekmath 011B} }_{\Delta }^{2}=\frac{1}{2}(\hat{{\Greekmath 011B}}_{1}^{2}+\hat{ {\Greekmath 011B}}_{2}^{2}-2\hat{{\Greekmath 011B}}_{12})$. While the sample variances for marginal distributions utilize the entire data, the estimate $\hat{{\Greekmath 011B}} _{12}$ only uses $n/2$ observations, potentially leading to a negative $ \widetilde{{\Greekmath 011B} }_{\Delta }^{2}$.
We therefore consider an alternative estimator for the asymptotic variance. On rewriting the covariance term in (ref), we get:
where ${\Greekmath 011A} _{{\Greekmath 0112} }=\mathrm{corr}({\Greekmath 0120} _{1}(X_{11}),{\Greekmath 0120} _{2}(X_{21}))$. We consider the following estimate for the asymptotic variance ${\Greekmath 011B} _{\Delta }^{2}$ in (ref):
where $\hat{{\Greekmath 011B} }_{k}^{2}$ for $k=1,2$, is given in (ref), and $\hat{{\Greekmath 011A} }_{{\Greekmath 0112} }$ is the sample correlation of the matched pairs $\left\{ (\hat{{\Greekmath 0120} }_{n_{1}}(X_{1i}),\hat{ {\Greekmath 0120} }_{n_{2}}(X_{2i}))\right\} _{i=1}^{m}$. We provide justification for the consistency of $\hat{{\Greekmath 011B} }_{\Delta }^{2}$ in the appendix.
We can extend $\hat{{\Greekmath 011B}}^{2}_{\Delta}$ in (ref) to estimation for the asymptotic variance matrix for a vector of LC ordinates.
For testing $H_{0}:\Delta {\Greekmath 0112} =c$, we can construct a Student-T test which, under the null hypothesis, converges in distribution to a standard normal distribution:
Inverting the test statistic yields an asymptotic confidence interval (CI) of level $(1-{\Greekmath 010B} )$ for $\Delta {\Greekmath 0112} $:
where $q_{p}$ is the $p$-th quantile of the standard normal distribution.
We now examine the bootstrap method for $\Delta {\Greekmath 0112} $. Unlike the percentile methods in \nocite*{Mills1997} and \nocite*{Biewen2002}, we will explore the Studentized bootstrap, which can benefit from Beran's refinement if the statistic bootstrapped is asymptotically pivotal; see \nocite*{Beran1988} and \nocite*{Davidson2004} for instance. We consider the following procedure to mimic the partial dependence under Assumption (ref).
We can also construct a two-sided bootstrap CI for $\Delta {\Greekmath 0112} $ at the level of $(1-{\Greekmath 010B} )$ using the empirical distribution of the bootstrap statistics $T_{j}^{\ast }$:
where $q_{p}^{\ast }$ is the $\lceil pB\rceil $-th order statistics of $ \{T_{j}^{\ast }\}_{j=1}^{B}$. Here, $\lceil \cdot \rceil $ denotes the ceiling function. The following proposition establishes the validity of the bootstrap method.
Here are some comments on the above bootstrap method. First, while we focus on the bootstrap method using the linearization technique, an alternative approach is the bootstrap method based on U-statistic theory (\nocite*{Shi1986} ). Second, we may view the partially dependent samples as samples with missing observations. In particular, we can reformat the data as $\mathbf{Z} _{i} = (X_{1i}, {\Greekmath 010E}_{1i}, X_{2i}, {\Greekmath 010E}_{2i})^{\prime }$, where $ {\Greekmath 010E}_{ki}$ is a variable that equals one if $X_{ki}$ is observed and zero otherwise. Then we employ the pair bootstrap based on $\{\mathbf{Z}_{i}\}_{i = 1}^{\bar{n}}$, where $\bar{n} = n_{1} + n_{2} - m$. The simulation experiments (not reported here) suggest that the two procedures yield nearly identical results. So, we will not report such types of CIs.
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In this section, we report two simulation experiments on the impacts of sample dependence and heavy tails on various confidence intervals for $ \Delta {\Greekmath 0112} $. For simplicity, we assume that two samples share identical sizes, i.e., $n_{1}=n_{2}=n$, unless stated otherwise. Then, we have $ {\Greekmath 0111} _{1}=0.5$, ${\Greekmath 0115} _{1}={\Greekmath 0115} _{2}={\Greekmath 0115} $ in Assumption (ref) (A3), and the asymptotic standard deviation in Proposition (ref) reduces to the following quantity:
where ${\Greekmath 0115} $ is the overlap portion, ${\Greekmath 011B} _{k}=[\mathrm{Var}({\Greekmath 0120} _{k}(X_{ki}))]^{1/2}$ for $k=1,2$, and ${\Greekmath 011A} _{{\Greekmath 0112} }=\mathrm{corr}[{\Greekmath 0120} _{1}(X_{11}),{\Greekmath 0120} _{2}(X_{21})]$ in (ref).
We simulate data from the Singh-Maddala (SM) distribution, which has proven effective in fitting the actual income distributions [\nocite*{McDonald1984}, \nocite*{Kleiber2003}]. The SM distribution [denoted $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(b,a,q)$] has distribution function:
where $b$ is a scale parameter, and $a$ and $q$ are shape parameters. The choice of scale parameter $b$ does not matter, as the Gini index and LC are scale-invariant. We assume that the first sample contains data drawn from $ \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1,1.6971,8.3679)$, where the estimates are given by \nocite* {McDonald1984} for fitting the U.S. income distribution in 1980. For the second sample, we follow \nocite*{Davidson2007a} and set $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM} (0.4,2.8,1.7) $ in order to mimic the net income distribution of German households.
We assume a Gaussian copula to capture the sample dependence for matched pairs.
where $\Phi $ and $\Phi _{{\Greekmath 011A} }$ denote the cumulative distribution functions (CDFs) of the standard univariate and bivariate normal distributions, respectively. The parameter ${\Greekmath 011A} $ indicates the degree of sample dependence, with $0$ for independence and $1$ ($-1$) for positive (negative) linear dependence.
We will explore various aspects of how sample dependence affects asymptotic confidence intervals (CIs). Recall that it is challenging to predict the value or sign of ${\Greekmath 011B} _{12}$ in (ref) for a given $ \mathrm{Cov}(X_{1},X_{2})$. This difficulty arises because the functional $ {\Greekmath 0120} (x)$ in (ref) is often not monotonic in $x$. To address this issue, we will first evaluate the correlation between ${\Greekmath 0120} _{1}(X_{1i})$ and ${\Greekmath 0120} _{2}(X_{2i})$, namely ${\Greekmath 011A} _{{\Greekmath 0112} }$ in (ref), against ${\Greekmath 011A} \in \{0,\pm 0.01,\ldots ,\,\pm 1\}$ in the Gaussian copula (ref). For simplicity, we consider matched pairs of observations (i.e., ${\Greekmath 0115} =1$). Since the marginal distributions are known, we can directly compute ${\Greekmath 0120}_{k} $ for $k = 1, 2$.
Figure (ref) plots the relationship between ${\Greekmath 011A} _{{\Greekmath 0112} } $ and ${\Greekmath 011A} $ based on $5000$ simulations, each consisting of $5000$ observations. We find that both curves of the Gini index (left) and LC ordinate (right) are $U$-shaped but asymmetric at zero, and that ${\Greekmath 011A} _{{\Greekmath 0112} }$ is rarely negative. Therefore, by considering sample dependence, we anticipate that the proposed inference method using overlapping samples will yield more efficient results due to its smaller asymptotic variance. However, the correlation ${\Greekmath 011A} _{{\Greekmath 0112} }$ can be monotonic in ${\Greekmath 011A} $. An example is the population mean, where ${\Greekmath 0120} (x)=x-{\Greekmath 0116} $ and, thus, ${\Greekmath 011A} _{{\Greekmath 0112} }={\Greekmath 011A} $. We then expect that the conventional inference approach, which ignores sample dependence, will underestimate the asymptotic variance and thus lead to incorrect conclusions.
To quantify the effects of sample dependence, we take the asymptotic standard deviation with independent samples as the benchmark, denoted by $ {\Greekmath 011B} _{\Delta }^{I}$, where
If we incorrectly specify ${\Greekmath 0115} =0$, we end up with the asymptotic variance ${\Greekmath 011B} _{\Delta }^{I}$. We examine the increase in standard deviations using the formula $({\Greekmath 011B} _{\Delta }^{I}-{\Greekmath 011B} _{\Delta }^{D})/{\Greekmath 011B} _{\Delta }^{D}$, where ${\Greekmath 011B} _{\Delta }^{D}$ is in (ref). Note that ${\Greekmath 011B} _{\Delta }^{D}$ is affected by the correlation between ${\Greekmath 0120} _{1}$ and ${\Greekmath 0120} _{2}$ (i.e., ${\Greekmath 011A} _{{\Greekmath 0112} }$) and overlap scope (i.e., ${\Greekmath 0115} $).
We consider again the marginal distributions $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1, 1.6971, 8.3679)$ and $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4, 2.8, 1.7)$. The sample dependence of the matched pairs is described by the Gaussian copula (ref) with ${\Greekmath 011A} \in \{0, \pm 0.1, \pm 0.5, \pm0.99\}$. The overlap portion of matched pairs is ${\Greekmath 0115} \in \{0.1, 0.5, 0.9\}$.
Table (ref) presents the results based on $5000$ replications with $5000$ observations each. We use the true function ${\Greekmath 0120}_{k}$ for $k = 1, 2$, though typically unknown in practice. Note that the sample dependency can substantially affect the asymptotic standard deviation if samples are strongly correlated or share significant overlap. Take the change in population mean $(\Delta {\Greekmath 0116})$ as an example. We find that the increase (decrease) in standard deviations resulting from neglecting sample dependence can be as much as $180.9\%$ ($23.6\%$).
We next examine the performance of $95\%$ confidence intervals (CIs) by different approaches based on $1000$ replications of $1000$ observations under the same DGP. Our goal is to investigate the impact of sample dependence on the performance of inference. We set the conventional method as the benchmark, which incorrectly assumes that two samples are independent. By (ref), we estimate the asymptotic standard deviation as follows.
where for $k=1,2$, $\hat{{\Greekmath 011B} }_{k}^{2}$ is the sample variance of $\hat{ {\Greekmath 0120} }_{n_{k}}(X_{ki})$ in (ref), and $\hat{{\Greekmath 011A} } _{{\Greekmath 0112} }$ is the sample correlation coefficient of $\left\{ (\hat{{\Greekmath 0120} } _{n_{1}}(X_{1i}),\hat{{\Greekmath 0120} }_{n_{2}}(X_{2i}))\right\} _{i=1}^{m}$.
We present simulation results in Table (ref) for the Gini difference, Table (ref) for the mean difference $\Delta {\Greekmath 0116}$, and Table (ref) for LC ordinates differences at $ p = 0.5$.
First, we find that conventional CIs, which fail to account for sample dependence, may suffer from two problems. They can either be overly conservative with overlarge widths (see columns $(9) - (12)$ in Table (ref) and (ref)), or they have coverage rates much lower than the nominal level $95\%$ (see columns $(9) - (12)$ in Table (ref) when ${\Greekmath 0115} = 0.9$ and ${\Greekmath 011A} = -0.99$). Such findings are consistent with our expectations in Figure (ref) and Table (ref).
Second, our proposed asymptotic and bootstrap CIs with overlapping samples can effectively control the level with reasonable widths; see columns $(5) - (8)$ in Table (ref), (ref), and Table (ref).
Third, we find that the intersection methods (IMs) are valid, though conservative, for all three indices differences, as indicated in $(1) - (4)$ in Table (ref), (ref) and (ref). Note that the IMs are applicable in more general scenarios and become the only valid procedure when overlapping samples fail to hold; see section (ref) for more details.
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Heavy-tailed distributions are notorious for causing problems for both asymptotic and bootstrap inference. We will examine the impacts of heavy tails on the performance of proposed inference methods. We still consider the SM distribution $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(b, a, q)$ in (ref). The upper tail behaves similarly to the Pareto distribution with parameter ${\Greekmath 010C} = aq$ , also known as the stability index. A smaller ${\Greekmath 010C}$ indicates a heavier upper tail. For a variance to exist, ${\Greekmath 010C}$ must be no less than two.
To mimic the U.S. income distribution in 1980, we set the distribution of the first sample to $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1, 1.6971, 8.3679$. For the second sample, we explore three SM distributions, $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4, 2.8, 1.7)$, $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4, 2, 1.5)$, and $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4, 1.4, 1.5)$. The corresponding stability indices are $4.76$, $3$, and $2.1$, indicating increasingly heavier upper tails.
For simplicity, we assume that the two sample sizes are identical, with $n \in \{100, 200, 500\}$. A portion ${\Greekmath 0115} \in \{0.1, 0.5, 0.9\}$ of observations is drawn in pairs, with dependence characterized by a Gaussian copula in (ref) with ${\Greekmath 011A} \in \{0, \pm 0.5, \pm0.99\}$ . The performance of CIs is evaluated based on $1000$ replications, with $B = 399$ bootstrap repetitions each.
We summarize the DGPs as follows.
DGP I-A: $F_{1} = \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1, 1.6971, 8.3679)$, $F_{2} = \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4, 2.8, 1.7)$, ${\Greekmath 011A} \in \{0, \pm 0.5, \pm0.99\}$ in (ref), stability index of $F_{2}$ is ${\Greekmath 010C}_{2} = 4.76$ , overlap portion ${\Greekmath 0115} \in \{0.1, 0.5, 0.9\}$.
DGP I-B: $F_{1} = \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1, 1.6971, 8.3679)$, $F_{2} = \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM} (0.4, 2, 1.5)$, ${\Greekmath 011A} \in \{0, \pm 0.5, \pm0.99\}$ in (ref), stability index of $F_{2}$ is ${\Greekmath 010C}_{2} = 3$, overlap portion ${\Greekmath 0115} \in \{0.1, 0.5, 0.9\}$.
DGP I-C: $F_{1} = \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1, 1.6971, 8.3679)$, $F_{2} = \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM} (0.4, 1.4, 1.5)$, ${\Greekmath 011A} \in \{0, \pm 0.5, \pm0.99\}$ in (ref), stability index of $F_{2}$ is ${\Greekmath 010C}_{2} = 2.1$, overlap portion ${\Greekmath 0115} \in \{0.1, 0.5, 0.9\}$.
We consider changes in the Gini index, population mean and LC ordinate at percentile of $0.5$. We assess the performance of four proposed confidence intervals (CIs) at the level of $95\%$. These include the asymptotic intersection method (IM-Asym), bootstrap intersection method (IM-Boot), asymptotic inference with overlapping samples (OS-Asym), and bootstrap inference with overlapping samples (OS-Boot).
For DGP I-A, we illustrate the performance of CIs for the difference in Gini index, mean, and LC ordinate in Table (ref), (ref), and (ref), respectively. As expected, the asymptotic and bootstrap CIs with overlapping samples (OS-Asym and OS-Boot) exhibit coverage rates close to the nominal level of $95\%$ due to the absence of heavy tails. However, the asymptotic and bootstrap intersection methods (IM-Asym and IM-Boot) are conservative, with consistently higher coverage rates than the nominal level, yielding a trade-off between efficiency and robustness.
For DGP I-B, we present the performance of CIs for three indices differences in Table (ref), (ref), and (ref). In this scenario, the second distribution has a heavy upper tail. The coverage rates of asymptotic CIs with overlapping samples are lower than $95\%$ when two samples are strongly positively related; see, for example, column OS-Asym when ${\Greekmath 011A} = 0.99$ and ${\Greekmath 0115} = 0.9$. The bootstrap CI (OS-Boot), however, can alleviate this issue. The asymptotic and bootstrap IMs (IM-Asym and IM-Boot) are still conservative. Nevertheless, the widths are considered acceptable compared to the bootstrap CIs.
For DGP I-C, we evaluate the performance of CIs for the three indices differences in (ref), (ref), and (ref). The second distribution now has an extremely heavy tail, resulting in a considerable variance. Neither the asymptotic and bootstrap CIs with overlapping samples (OS-Asym and OS-Boot) yield reliable results, as the coverage falls below $95\%$. However, the bootstrap CI (OS-Boot) suffers less coverage distortion compared to the asymptotic CI. The IMs (IM-Asym and IM-Boot) remain valid and provide reasonable widths, sometimes comparable to those of OS-Boot.
To sum up, the asymptotic CIs with overlapping samples (OS-Asym) perform well, unless the tail is heavy. The bootstrap inference with overlapping samples (OS-Boot) can effectively address the issue of OS-Asym, except that the tail is too heavy. Such a finding is consistent with the literature; see, for example, \citename{Davidson2009} (\citeyear*{Davidson2009}, \citeyear*{Davidson2012}) . The intersection methods (IMs) tend to be conservative, provided the tail is not too heavy so that the variance does not exist; see a numerical exercise in the appendix. However, they can yield reliable results when both OS-Asym and OS-Boot fail, particularly when overlapping samples (Assumption 3.2) or the limiting joint distribution (Assumption 3.3) are in question, as we will illustrate below.
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This section examines scenarios where the overlapping samples framework in Assumption (ref) may not be applicable. We take the mean difference $\Delta{\Greekmath 0116} = {\Greekmath 0116}_{1} - {\Greekmath 0116}_{2}$ as an example for two reasons. First, ${\Greekmath 0120}$ in (ref) has a simple expression of ${\Greekmath 0120}(x) = x - {\Greekmath 0116} $. As ${\Greekmath 0120}(x)$ is increasing in $x$, we can compute ${\Greekmath 011A}_{{\Greekmath 0112}}$ in (ref) as ${\Greekmath 011A}_{{\Greekmath 0112}} = {\Greekmath 011A}$. Second, the population moments are usually easier to calculate than the welfare indices.
We demonstrate the robustness of intersection methods (IM) by comparing them to approaches based on overlapping samples. Specifically, we aim to investigate the performance of various CIs when Assumption (ref) fails, while Assumption (ref) remains valid.
First, we consider samples that violate Assumption (ref) $(\mathbf{ A2})$. Suppose that pairs of unobserved observations, denoted by $ \{(U_{1i},U_{2i})\}_{i=1}^{m}$ are iid data from the joint distribution $ (F_{1},F_{2},{\Greekmath 011A} )$, where $F_{1}=\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1,1.6971,8.3679)$ and $F_{2}= \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4,2.8,1.7)$. The correlation coefficient ${\Greekmath 011A} $ in (ref) is either ${\Greekmath 011A} =\pm 0.95$ or selected randomly from a uniform distribution over $(-1,1)$, i.e., $U(-1,1)$. Suppose that we only observe the ordered values of $\{(U_{1i},U_{2i})\}_{i=1}^{m}$. Let $X_{k,i}=U_{k(i)}$ for $k=1,2$ and $U_{k(1)}\leq \cdots ,\leq U_{k(n)}$. The overlap of samples are then $(X_{1i},X_{2i})_{i=1}^{m}$. The condition $( \mathbf{A2})$ is violated in this case. The unmatched observations are iid data from $F_{1}$ and $F_{2}$. The sample sizes are $n=100,200,500,1000$ with overlap portions ${\Greekmath 0115} =0.5,1$. So, the DGP is as follows.
DGP II-A: (Violate $(\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{A}2)$) $\{X_{k, i}\}_{i=1}^{n} = \{U_{k(i)}\}_{i=1}^{n}$ for $k = 1, 2$, where $U_{k(i)}$ is the $i$-th order statistic. $\{U_{1, i}\}_{i=1}^{n} \overset{iid}{\sim} \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1, 1.6971, 8.3679)$, $\{U_{2, i}\}_{i=1}^{n} \overset{iid}{\sim} \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4, 2.8, 1.7)$, ${\Greekmath 011A} = 0.95$, $-0.95$ or ${\Greekmath 011A} \sim U(-1, 1)$. The sample sizes are $n = 100, 200, 500, 1000$. The overlap portions are ${\Greekmath 0115} = 0.5, 1$.
Second, we conduct an experiment where condition Assumption $(\mathbf{A3})$ fails. We assume that the second sample consists of $2n$ iid observations from $\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(1,1.6971,8.3679)$. Given the sample $\{X_{2,i}\}_{i=1}^{2n}$ , define $X_{1,i}=X_{2,2i-1}-X_{2,2i}$ for $i=1,\ldots ,\,n$. Let $ \{(X_{1,i},X_{2,2i-1})\}_{i=1}^{n}$ be the matched pairs. By construction, $ \{X_{1,i}\}_{i=1}^{n}$ and $\{X_{2,2i-1}\}_{i=1}^{n}$ are dependent, which violates condition $(\mathbf{A3})$. The DGP is summarized as below.
DGP II-B: (Violate $(\relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{A}3)$) $\{X_{2, i}\}_{i=1}^{2n} \overset{iid}{\sim} \relax\protect\ifmmode\expandafter\text@\else\expandafter\mbox\fi{SM}(0.4, 2.8, 1.7)$ and $\{X_{1, i}\}_{i=1}^{n}$ where $X_{1, i} = X_{2, 2i - 1} - X_{2, 2i}$. $n = 100, 200, 500, 1000$.
Table (ref) provides simulation results for DGP II-A. Table (ref) provides simulation results for DGP II-B. Both tables demonstrate that intersection methods are effective, but approaches based on overlapping samples are invalid.
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{\Alph{section}} {\Alph{section}} \setcounter{theorem}{0} \setcounter{definition}{0} \setcounter{equation}{0}
This section examines the dynamic change in household financial inequality over time in Italy. We utilize the data from the Survey of Household Income and Wealth (SHIW) conducted by the Bank of Italy. This data has been used by several studies, including \nocite*{Raffinetti2015}, \nocite*{Raffinetti2017}, \nocite*{Bouezmarni2024} and \nocite*{Dufour2024}.
For simplicity, we assume that each sample consists of iid observations. To address the heterogeneity in household structures, we normalize data by the equivalence scale proposed by \nocite*{Kakwani1998}:
where, for family $i$, $ad_{i}$ is the number of adults within a family, $ \{ch_{j,i}\}_{j=1}^{3}$ denote the number of children with age in $(0,5]$, $ [6,14]$ and $[15,17]$, respectively, and $w_{i}$ is the number of employees or self-employed individuals within the families. Table (ref) presents some summary statistics, and Figure (ref) plots the estimated densities and distribution functions.
To analyze the changes in financial inequality in Italy from 2012 to 2014, we must address two key issues. First, there is an overlap in the samples, as nearly half of the observations appear in both waves. Therefore, we must take the sample dependence into account. Second, financial income can be negative, indicating that some households experienced losses. According to Table (ref), $10\%$ of households suffered losses in 2012, while $8.5\%$ faced losses in 2014, respectively. We therefore consider a family of extended inequality measures proposed by \nocite*{Bouezmarni2024} for possibly negative variables. For convenience, we focus on two types of specific measures.
The sign-conditional LCs and Gini indices are tools for analyzing internal inequality levels inside the group of winners or losers. The signed LC and positive Gini index measure the overall level of inequality. See \nocite* {Bouezmarni2024} and \nocite*{Dufour2024} for more discussion. To simplify our discussion, we will call $L^{\oplus}$ (resp. $L^{\ominus}$) the positive (resp. negative) truncated LC. We call $I^{\oplus}$ and $I^{\ominus}$ similarly.
To facilitate our discussion, we use the superscript $\dagger$ (or $*$) to simplify notations to indicate a specific object from a collection. For example, $(L^{\dagger}, F^{\dagger})\in \{(L^{\oplus}, F^{\oplus}), (L^{\ominus}, F^{\ominus})\}$ means that $(L^{\dagger}, F^{\dagger})$ can be either the sign-conditional LCs with their corresponding distributions. We will omit the collection if no confusion arises.
We estimate the extended inequality measures by plugging the associated EDFs. The estimated extended LCs are plotted in the left panels of Figure (ref), (ref), and (ref). The estimates for extended Gini indices are displayed in Table (ref). We will then conduct statistical inference for these estimates. As shown in \nocite*{Dufour2024}, the estimators are ALG functionals under specific conditions (outlined below).
Under Assumption (ref), it is not difficult to show that the above estimates fulfill Assumption (ref) by multivariate central limit theorem. So, we obtain the following corollary.
According to (ref), we estimate the asymptotic variance by the sample variance of the estimated influence function. We then obtain CIs for the inequality changes at the level of $95\%$ using four proposed methods, including the asymptotic intersection method (IM-Asym), bootstrap intersection method (IM-Boot), asymptotic inference with overlapping samples (OS-Asym), and bootstrap inference with overlapping samples (OS-Boot).
We first examine the internal inequality among winners. Figure (ref) plots the change in positive LC from 2012 to 2014, i.e., $\Delta L^{\oplus }=L_{2014}^{\oplus }-L_{2012}^{\oplus }$, and $95\%$ CIs. We find that $L_{2014}^{\oplus }$ is closer to the diagonal line, which suggests a decrease in inequality level inside the group of winners. Asymptotic and bootstrap CIs based on overlapping samples (OS-Asym and OS-Boot) confirm this result, as zero falls outside the CIs. However, the intersection methods (IM-Asym and IM-Boot) give an opposite conclusion. Given the data structure, we believe that overlapping samples are a suitable assumption and thus prefer the findings from OS-Asym and OS-Boot, as IM can be conservative under such a scenario based on simulation results in the previous section. We observe similar results for $\Delta I^{\oplus }$ in Table (ref). The estimate for $\Delta I^{\oplus }$ in Table (ref) is only $-0.0246$, suggesting a relatively small decrease in inequality level.
We next study the internal inequality among the losers, as measured by $ \Delta L^{\ominus}$ in Figure (ref) and $\Delta I^{\ominus}$ in Table (ref). We find that only the OS-Asym CI for $ \Delta I^{\ominus}$ excludes zero, while all the other CIs contain zero. Given the simulation evidence in section (ref), OS-Boot CI is generally more reliable than OS-Asym CI. Therefore, we cannot conclude that there is a significant change in internal inequality within the subgroup of losers.
Finally, we analyze the overall inequality based on $\Delta L^{s}$ in Figure (ref) and $\Delta I^{p}$ in Table (ref). The estimated signed LC displays a flat segment (in the left panel of Figure (ref)), implying that the underlying distribution is not differentiable at the corresponding quantile. So, we should be cautious when interpreting inference results for the flat segments of $\Delta L^{s}$.
For $p < 0.1$, we note that asymptotic and bootstrap CIs with overlapping samples (OS-Asym and OS-Boot) exclude zero, indicating a change over time. We observe similar findings about $\Delta I^{p}$ by OS-Asym and OS-Boot CIs. In contrast, the CIs based on IMs (IM-Asym and IM-Boot) include zero, possibly due to the method's conservativeness. Note that, however, the magnitude of the change in inequality is economically small.
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{\Alph{section}} {\Alph{section}} \setcounter{theorem}{0} \setcounter{definition}{0} \setcounter{equation}{0}
So far, we have assumed that researchers have a sample of micro-level data drawn independently and identically distributed from a population distribution. However, many large-scale household surveys by design involve stratification and clustering. In this section, we briefly sketch the potential extension of our methods to complex survey data.
In most surveys, the strata are chosen in advance and thus fixed. The correction is straightforward; see \nocite*{Cochran1977} for a textbook-level treatment. Therefore, we mainly discuss how to extend our methods, especially the intersection approach, to clustered data. Cluster-robust inference has become increasingly popular over the past decade and is now employed routinely in many empirical microeconomics studies; see \nocite* {MacKinnon2023d} for a recent survey. There are at least two ways to incorporate clusters into our framework.
First, both samples in Assumption (ref) can be generalized to clustered data. In general, the intra-cluster correlation is positive, so when clusters are large, incorrectly assuming IID observations can lead to smaller asymptotic variances and thus unreliable inference (over-rejection of tests or insufficient coverage of CIs) [\nocite* {MacKinnon2016a}].
Two distinct types of assumptions are available for the asymptotic theory of cluster-robust inference. The most common method is the "large number of clusters" approach, where the number of clusters, often denoted by $G$, tends to infinity [\nocite*{Djogbenou2019} and \nocite*{Hansen2019}]. The other is the fixed-$G$ or "small number of large clusters" method [\nocite* {Ibragimov2010} and \nocite*{Ibragimov2016}]. The bootstrap methods, especially the wild cluster restricted (WCR) bootstrap, often yield much more reliable inferences than asymptotic procedures [\nocite*{MacKinnon2016} and \nocite* {MacKinnon2023c}]. The WCR bootstrap is usually based on the Rademacher distribution [\nocite*{Davidson2008a} and \nocite*{Djogbenou2019}]. Nevertheless, when the number of clusters is small, a six-point distribution is preferred [ \nocite*{Webb2023}].
We may further extend to a multi-stage sampling design using techniques in \nocite*{Zheng2002} or \nocite*{Bhattacharya2005}.
Second, the clustered data can generate dependence between the two samples. To see it, suppose that there are $G$ groups, with group $g$ containing a sample of $n_{g}$ pairs of observations $(X_{1, gi}, X_{2, gi})$ . One may conduct cluster-robust inference using either the "large number of clusters" or the "small number of large clusters" approach. However, the intersection methods (IMs) are also applicable. Furthermore, we can still employ IMs even when asymptotic inference can fail.
One example is cluster heterogeneity, which we can demonstrate by the simulation experiment under DGP II-A. We may view such a DGP for the "large number of clusters" approach with $G = n$. That is, each group contains only one pair of observations. Note that, due to sorting, the correlation within each pair varies dramatically across groups, except for $ {\Greekmath 011A} = 0.95$, the highly positively correlated case. As reported in Table (ref), the OS-based approach, which coincides trivially with the cluster-robust inference, fails to provide reliable CIs. However, the IM approach remains valid.
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{\Alph{section}} {\Alph{section}} \setcounter{theorem}{0} \setcounter{definition}{0} \setcounter{equation}{0}
Traditional inference methods for comparing welfare indices typically assume that samples are independent. However, this assumption can be problematic because income samples are often dependent due to the overlap between consecutive periods.
This paper considers a broad family of indices expressed as asymptotically linear Gaussian functionals and proposes inference methods for index differences with dependent samples. We first study generic dependent samples and provide asymptotic and bootstrap intersection methods that are robust to arbitrary sample dependence. We then explore the overlapping samples, a specific type of dependent samples where the dependence arises solely from the matched pairs, and propose asymptotic and bootstrap confidence intervals for changes in indices. We additionally justify using influence functions to estimate the asymptotic variance and covariance consistently.
We evaluate the performance of the proposed methods through a series of simulation experiments. First, we find that sample dependence can substantially impact asymptotic variance. Therefore, our proposed methods, which utilize overlapping samples, can be more efficient than conventional procedures based on independent samples. Next, we analyze the effects of heavy tails and find that the asymptotic inference performs well for realistic distributions but poorly for distributions with heavy tails. The bootstrap method can alleviate this issue, except when the variance is substantial or nonexistent. Finally, the intersection methods prove to be reliable under generic dependent samples, particularly when the assumption of overlapping samples is inappropriate. The intersection methods are also reasonably efficient in certain instances, such as those involving extremely heavy-tailed distributions.
To illustrate our methods, we applied them to analyze the changes in financial inequality among Italian households from $2012$ to $2014$. The application also highlights the practical importance of using extended inequality measures in the presence of negative values.
We finally briefly discuss potential extension to clustered data and multi-stage survey sampling. Moreover, we demonstrate that the intersection methods are also robust to some cases where cluster-robust inference fails.