Using the Dagum model to explain changes in personal income distribution

This article studies the evolution of personal income distribution in Spain from 1995 to 2005 using the Dagum model. Dagum's three parameter model (type I) provides a good fitting to empirical income distributions in Spain. Moreover, its parameters can be interpreted as economic indicators of income distribution changes. After studying the economic interpretation of the Dagum model parameters, we analyse the impact of parameter changes on different income percentiles and also on the evolution of inequality in Spain using data from the European Community Household Panel (ECHP) and the European Union Statistics on Income and Living Conditions (EU-SILC).