Modelling of Income Distribution of Czech Households in The Years 1996-2005

After the 1989 Velvet Revolution, the transformation to a market economic system, and mainly the formation of new income sources and the process of a significant differentiation in wages, has caused crucial changes to the income distribution. There have been systematic changes in the model parameters as well as changes manifesting the increasing numbers of discrepancies between empirical and theoretical income distributions: these have caused a contamination of the model. This paper concentrates on the verification of the validity of the statistical model of income distribution used in the Czech Republic at present. In order to consider as precisely as possible the suitability of log-normal distribution as the proper model for income distribution used in the Czech Republic, the optimisation of parameters is necessary. The accuracy of the model construction is crucial and is given, to some extent, by the sensitivity and adaptability of procedures used for estimation of the model parameters. The paper shows methods usable for the achievement of this goal and presents results obtained by their application on data files from the years 1996-2005.