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Pareto versus lognormal: a maximum entropy test

Bee, Marco and Riccaboni, Massimo and Schiavo, Stefano Pareto versus lognormal: a maximum entropy test. Physical Review E, 84 (2). 026104. ISSN 1539-3755 (2011)

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It is commonly found that distributions that seem to be lognormal over a broad range change to a power-law (Pareto) distribution for the last few percentiles. The distributions of many physical, natural, and social events (earthquake size, species abundance, income and wealth, as well as file, city, and firm sizes) display this structure. We present a test for the occurrence of power-law tails in statistical distributions based on maximum entropy. This methodology allows one to identify the true data-generating processes even in the case when it is neither lognormal nor Pareto. The maximum entropy approach is then compared with other widely used methods and applied to different levels of aggregation of complex systems. Our results provide support for the theory that distributions with lognormal body and Pareto tail can be generated as mixtures of lognormally distributed units.

Item Type: Article
Identification Number: 10.1103/PhysRevE.84.026104
Additional Information: © 2011 American Physical Society
Subjects: Q Science > QA Mathematics
Q Science > QC Physics
Research Area: Economics and Institutional Change
Depositing User: Ms T. Iannizzi
Date Deposited: 14 Dec 2011 15:06
Last Modified: 04 Dec 2014 11:46
URI: http://eprints.imtlucca.it/id/eprint/1041

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