skew models, such as the lognormal and the Pareto functions, have been proposed
as suitable descriptions of income distribution. Specific distributions are
usually applied in empirical investigations. It is a common opinion that the
Pareto curve often provides an adequate description of higher incomes. Recently, double Pareto distributions that obey the power
law in both the upper and lower tails have been suggested to reflect a general
distribution of personal income. In this study, the literature concerning
double Pareto models is presented and the model is applied to Finnish income
JEL classification numbers: I32.
Keywords: Maximum likelihood estimate, Method of
moments, Bayesian method, Mean Squared Error, Lognormal, double Pareto, Coefficient
of determination, survival function, Geometric Brownian motion.