The Adjusted SNR and It's Application for Selection Lorenz Function of Income Inequality Analysis

Muhammad Fajar, Setiawan*, Nur Iriawan

*Corresponding author for this work

Research output: Contribution to journalConference articlepeer-review

3 Citations (Scopus)

Abstract

The formulation of signal-to-noise ratio (SNR) does not take into account the number of parameters used in the model, which can result in capturing intense noise when the number of predictor variables increases. Additionally, there is currently no probabilistic mechanism for comparing the model goodness measure values (in this case, adjusted SNR) of two candidate models used to select the best model. The research objective is to construct an adjusted SNR that accounts for the effect of the number of parameters used in the functional form of a model and establish a Lorenz function selection procedure using the adjusted SNR. The adjusted SNR is constructed by combining SNR and adjusted RR2 (RRaaddjj 2 ), while the Lorenz function selection procedure is formed through a bootstrap mechanism. The proposed methods are applied to household consumption expenditure in Banten Province in 2020, the total income of employment per household in Ghana in 1998, and household income in South Africa in 2015, sourced from BPS-Statistics Banten Province of Indonesia, the Ghana Statistical Service, and Statistics South Africa, respectively. The adjusted SNR developed in this research can be used in empirical practice and addresses the weakness of SNR in not accounting for the number of parameters in the model. Selecting the Lorenz function through bootstrap using the adjusted SNR to measure model goodness-of-fit is a fundamentally new way of analyzing income inequality.

Original languageEnglish
Pages (from-to)1-16
Number of pages16
JournalProcedia Computer Science
Volume227
DOIs
Publication statusPublished - 2023
Event8th International Conference on Computer Science and Computational Intelligence, ICCSCI 2023 -
Duration: 2 Aug 20233 Aug 2023

Keywords

  • Lorenz curve
  • bootstrap
  • income
  • inequality
  • measure
  • model selection
  • signal-to-noise ratio

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