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2. The Supplemental Poverty Measure (SPM), by the US Census Bureau, extends the oicial poverty measure by taking in account many of the government programs
2. The Supplemental Poverty Measure (SPM), by the US Census Bureau, extends the oicial poverty measure by taking in account many of the government programs designed to assist low-income families. Here we consider households in Massachusetts with minimal income of $25,000 and aim to describe income distribution in the state. To this end, we assume that income follows a Pareto distribution and t a regression on the following predictors: numadults is the number of adults in the household; tenure is household occupancy tenure, a factor with two levels, \"own\" and \"rent\"; and race has four levels, \"white", \"black\(c) How would you rank incomes with respect to race? Do incomes differ significantly among races? Explain. (d) The Pareto "80 20" principle stipulates that 80% of the income belongs to the top 20% of the households. This principle depends, in fact, on the index; in this case, it can be shown that a = 1.16. Test if the Pareto principle applies to rented households with two asian occupants. For simplicity, assume that the parameter estimates are not correlated. Clearly state the test statistic, its distribution under the null, and your assumptions. What is your conclusion at 5% significance
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