STOCHASTIC-DOMINANCE AND STATISTICAL COMPARISONS OF INCOME-DISTRIBUTION FUNCTIONS - A NEW METHOD FOR EVALUATING THE ECONOMIC WELL BEING OF THE ELDERLY

This paper assesses the economic well being of the U.S. elderly population by applying asymptotically distribution-free statistical tests of stochastic dominance relations characterizing income distribution functions. The procedure is new and overcomes serious difficulties encountered in naive comparisons of summary statistics which are widely used in assessing economic well being. An important advantage of this approach is that it exploits all the information contained in the income distribution function. Application of the method to compare the elderly population to the entire U.S. population in the 1980's reveals evidence of a higher per capita level of economic well being among older Americans. The method can be applied to other socioeconomic groups and in other countries provided that appropriate micro data are available. © 1990 Kluwer Academic Publishers.