Let's create a plot of the income distribution as it's represented in Saez (2001), Figure 2.
That is, we'll plot the ratio of z_m / zbar, where zbar is the mean income and z_m is the mean income above point m in the distribution.
The purpose of this is to see if the ratio asymptotes as would be the case with a Pareto distribution. It should look similar to our plot of theta_z, but if it does not, then that may suggest that our approximation of f'(z) is not working as expected (see Issue #11).
jdebacker
commented
2 years ago
Let's create a plot of the income distribution as it's represented in Saez (2001), Figure 2.
That is, we'll plot the ratio of z_m / zbar, where zbar is the mean income and z_m is the mean income above point m in the distribution.
The purpose of this is to see if the ratio asymptotes as would be the case with a Pareto distribution. It should look similar to our plot of theta_z, but if it does not, then that may suggest that our approximation of f'(z) is not working as expected (see Issue #11).