Theil inequality coefficient eviews software

Is it sufficient for me to just rely on the r2 or is there any stata commandprogram that could decide the best model. Descriptive statistics simple linear regression model. The numerical result is in terms of negative entropy so that a higher number indicates more order that is further away from the ideal of maximum disorder. Jan 12, 2015 hi b, thank you for your question about a point that is often misunderstood. Timmermann, 2006 for evaluating whether averages of forecasts perform better than the individual forecasts. Notation and terminology begin with some tools for the description of income distribution. Several approaches exist for obtaining a nonparametric estimate of the intercept. It is shown that theil s initial insight leads naturally to a very general class of inequality measures. Can anyone provide the exact formula used by eviews. Decompose theil index for data including zero values no. But if we insist on the percentage change approach, then we have to conclude that 0. Forecast evaluation using theils inequality coefficients the. However, there seems to be some confusion about this coefficient which may stem from the fact that. Forecast evaluation using theils inequality coefficients.

Home site map site search free online software descriptive statistics simple linear regression model performance inequality coefficienttheil home up mse 1 mse 2 mse 3 decomp. Under this restriction, they measure inequality by the squared coefficient of variation cv. The utipunido data set of industrial pay inequality is a panel comprised of the betweengroups component of theil s t statistic measured in different countries and years across a stable and consistent set of industrial sectors. Ive just checked the most recent eviews help files, and the definition of the theil u2 coefficient still hasnt been included.

Pdf the analysis of forecasting performance by using time. Income inequality metrics or income distribution metrics are used by social scientists to measure the distribution of income and economic inequality among the participants in a particular economy, such as that of a specific country or of the world in general. In terms of time series modeling, both predict values of a dependent variable beyond the time period in which the model is estimated. Model equations may be entered in text or as links for automatic updating on reestimation. One of the first applications was by hee in 1966, and two recent uses were by tryfos and by sahi and. A nearly painless introduction to the theil measure of. Helping students to measure income and health inequality using data duration. So if everyone in a country had the same income, the number would be 0, and if one person made all the money and everyone else made. It is a special case of the generalized entropy index.

The noncommercial academic use of this software is free of charge. Section 4 introduces a general class of inequality indices foreshadowed by theils work and section 5 its properties. The stats and theil options are used to select goodnessoffit statistics. Nevertheless, th e correlation between in equality and the levels of educ ation i s rather unclear in that the values of the theil. Fields and yoo 2000, inequality must be measured over logarithm of income. Among the highlights are new tools for automatic arima forecasting, forecasting evaluation and averaging, and var forecasting. A comparison of the gini and atkinson measures of inequality. Leuthold authors of papers published in this journal occasionally use theil s inequality coefficients as measures of the accuracy of a set of predictions generated from some model. However, two pages later in this same book, theil states, all applications of the inequality coefficients in the following chapters will refer to predicted and actual changes in the variables 1958, p. A clarification friedhelm bliemel introduction theil s coefficient of inequality is one of the statistical forecasting evaluators frequently cited in the literature 17. It is shown that theils initial insight leads naturally to a very general class of inequality measures. Thanks for contributing an answer to stack overflow. The gini measure however is a positive measure, whilst the atkinson is a normative measure.

While different theories may try to explain how income inequality comes about, income inequality metrics simply provide a system of. Ive made a small program to illustrate it, its in the end of the post. Eviews contains almost all established estimation models ls, 2sls, glm, etc. However, it suffers of many flaws that have been discussed in detail by song et al. The theil inequality coefficient always lies between zero and one, where zero indicates a perfect fit. Percentage error mape and theils inequality coefficient tic.

Pdf individual income inequality and its drivers in. Located within the battery of statistics available for forecast evaluation are theil s inequality coefficients. Actual values must be provided in the input data set for these statistics to be printed. Theils method actually yields an estimate of the slope of the regression line. Mape and theils inequality coefficient tic are used to be able to. Application of arima models to nigerian inflation dynamics by. The gini coefficient is derived from the lorenz curve, which sorts the population from poorest to richest, and shows the cumulative proportion. How to test unit root and remove unit root from data and how to make data stationary using eviews duration. The results show the model is relevant for forecasting. Eviews eviews ihs markit qms software acquista in italia. Theil s 1967 elegant first presentation of this measure of inequality was based on statistical information theory.

I am sorry that this question is irrelevant to stata. The version of theils coefficient that has been implemented into the. Theil s t inequality measure is a commonly used tool for inequality measurement as it satisfies important axiomatic requirements such as the principle of transfers and. Theil s coefficient of inequality is one of the statistical forecasting evaluators frequently cited in the literature 17. Theil s original presentation of his inequality indicator. All the ingredients to carry out both the static decomposition of the index shorrocks 1980, econometrica and the dynamic decomposition mookherjee and shorrocks 1982, economic journal are easily accessible among the saved results of ineqdeco.

The theil index, on the other hand, shows an inverse relation between the level of development and inequality, and does not indicate an invertedu pattern. Theil inequality coefficient englishfrench dictionary. Theils informationtheoretic approach to the measurement of inequality theil 1967 is set in the context of subsequent developments over recent decades. Theil, inequality and the structure of income distribution. A and e have to be sorted so that the values in the column income per individual are lined up in ascending order. The gini coefficient is commonly used as a measure of inequality of income, consumption, or wealth. Potential confusion concerning theils inequality coefficients. Calculation of gini and theil inequality coefficients for. In addition, the theils inequality coefficient u with respect to the central values of the fuzzy regression where. Rmse, mae, mape, theil inequality coefficient and proportions. Theil inequality coefficient in addition, eviews can compute the combination test, or forecast encompassing test chong and hendry, 1986.

Jun 19, 2017 the gini coefficient is used to measure inequality of a region. Murphy, calculation of gini and theil inequality coefficients for irish household incomes in 1973 and 1980, economic and social research institute, economic and. Theil inequality coefficient translation in englishfrench dictionary. Statistical software components from boston college department of economics. For a bad predictor, both will be of similar magnitude. However, there seems to be some confusion about this coefficient which may stem from the fact that theil himself proposed two different formulae at different times under the same name. In addition, eviews can compute the combination test, or forecast encompassing test. A method for simulation model validation based on theils. The parameter pairs a and e need to be sorted for the computation of the gini coefficient. Stateoftheart model building tools for multiple equation forecasting and multivariate simulation. Rmse root mean squared error, mae mean absolute error, mape mean absolute percentage error, and the theil inequality coefficient.

Tryphonopoulos, have utilized this inequality coefficient, employing actual data. May 10, 2002 distributional analysis, a key input in policy formulation and evaluation, involves a comparison of alternative distributions of the living standard associated with different social arrangements. The theil method is described in full elsewhere conceicao, ferreira and galbraith 1999. Derivation of theils inequality measure from lorenz curves. Theil inequality coefficient tic is widely used since 1977 because it is simple and easy to understand. Eviews features a number of additions and improvements to its toolbox of basic statistical procedures. A popular measure of inequality is the gini coefficient, which ranges from 0 perfect equality to 1 perfect inequality, but is typically in the range of 0. Apr 01, 20 thus, smaller rmse, mae, and theil inequality coefficient are preferred. Is the gini coefficient not a sufficient measure of. Essamanssah poverty reduction group the world bank washington, d.

Conversely, only additively decomposable measures of inequality can be used in ms or morduch and sicular. Eviews offers four different measures of forecast accuracy. This free online calculator computes the following concentration statistics. In the supplied link there is only one theil inequality coefficient.

On the use of theil s inequality coefficients raymond m. The choice of the atkinson inequality measure is guided by three factors. The mathematical basics of popular inequality measures. You will see that the theil index corresponds to ge1 in ineqdecos parlance. Hi b, thank you for your question about a point that is often misunderstood. We believe we can establish reasonably reliable relationships between these measures and the broader concepts of inequality. This additional source of forecast uncertainty tends to rise over the forecast horizon, leading to a pattern of increasing forecast errors. Asking for help, clarification, or responding to other answers. A simple and robust alternative to least squares regression is theil regression, first proposed by h. Describing income inequality theil index and entropy class indexes 5 4. It has been used to study inequality in income theil 1967 as well as use of resources such as energ y, in terms of. Our work has emphasized the use of theil s t statistic to. However, when testing the meaning of regression coefficients, all of the.

A positive measure is purely statistical whereas a normative measure is based on an explicit formulation of social welfare and the loss incurred from unequal distribution. Jul 12, 20 the gini and atkinson indexes are both measures of inequality. The coefficient for lagged cs will be placed in c1, the coefficient for the constant is c2, and the coefficient of inc is c3. It is thus closely related to a number of other commonly used families of.

Forecast evaluation using stata or eviews researchgate. Lorenz curve and gini coefficient measures of income inequality. Table 6 below provides information on these forecast measures. For a good predictor, the numerator will be small compared to the denominator. Theil inequality coefficient combination tests to test whether an average, or combination, of the individual forecasts may perform better than the individual forecasts themselves, eviews offers the combination test, or forecast encompassing test of chong and hendry 1986 and refined by timmermann 2006. For the theil index and the hoover index no sorting is required.

The results in table 3 indicate that both coefficients are statistically significant at 1% level of significance. The only thing that is asked in return is to cite this software when results are used in publications. In my function, fex 19968, ginicoeff requires two variables. Using a spreadsheet or other computer software makes the calculations above rather painless, even for thousands of data points. Forecasting real gdp rate through econometric models. Given that last years theils t statistic for salaries at universal widget was. What is the gini coefficient and what is its formula. It is based on the lorenz curve, a cumulative frequency curve that compares the distribution of a specific variable e.

The theil index is a statistic primarily used to measure economic inequality and other economic phenomena, though it has also been used to measure racial segregation the theil index t t is the same as redundancy in information theory which is the maximum possible entropy of the data minus the observed entropy. In terms of time series modeling, both predict values of a dependent variable. Theil s second measure theil 1967 is anoth er widely used index of inequality. Mar 01, 2017 forecasting, evaluation, hossain academy. The theil index measures an entropic distance the population is away from the ideal egalitarian state of everyone having the same income. How to interpret dummy variables and the dummy variable trap explained part 1 duration. In this paper, we describe a sas macro for implementing theil. Philippe van kerm statistical software components from boston college department of economics.

The first tests for forecasting models were developed in 1939 by tinbergen, in response to. The contribution of alabama to the between state inequality measure of theil s t statistic in 1970 is simply. Advantages and disadvantages coefficient of variation theil index gini coefficient easy to understand immune to outliers for weighted data includes all data not affected by inflation i. This case study has addressed potential confusion concerning the use of theils inequality coefficient which might arise due to the existence of alternative specifications, differing properties, neglected insights from the literature and contrasting presentations of material in textbooks and software packages. I tried to decompose the income by race and strata, but it wont work. Thus, smaller rmse, mae, and theil inequality coefficient are preferred. Eviews also sets these equal to their expected values, which differ randomly from realized values. You can include a consecutive range of lagged series by using the. Step 1 as usual as us to sort income distributions before proceeding with the calculation. It seems to me that the degree of inequality, as measured by theil index, changed little in both cases. An overview some preliminaries in what follows it will be useful to distinguish between ex post and ex ante forecasting. See in the producers video why eviews is the world leader in windowsbased econometric software. Using theil s u to evaluate a time series forecasting model in excel. I tried to compute the forecast evaluation statistics by myself, and the only one that didnt match the results presented in eviews is the theil u2.