Composite model of income distribution in Russia

Abstract

Purpose: The article is devoted to the problem of modeling the monetary income distribution in Russia. Discussion: Following the growing importance of income inequality problem, we analyze the existing Russian and foreign scientific approaches to the income probability function estimation. We assessed the existing official Russian methodology of income differentiation identification and proposed the new approach to Russian income distribution modeling. Results: We revealed the significant underestimation of the share of "high-income" income by official statistics using the proposed alternative income density function. The latter combines a nonparametric estimation of density in the "low" and "medium" income segment, which is calculated from the data of the Russian Household Budget Survey, and the approximation of "high" income by the Pareto function, which parameters were identified on the basis of the data from the Federal Tax Service of Russia. The income inequality estimates we obtained show a higher level of income inequality in Russia than the officially declared one.