TABLE OF CONTENTS
Prefatory Note - Raj Chetty, John N. Friedman, Janet C. Gornick, Barry Johnson, Arthur Kennickell
DOI: 10.7208/chicago/9780226816043.002.0008
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Acknowledgments
Introduction - Raj Chetty, John N. Friedman, Janet C. Gornick, Barry Johnson, Arthur Kennickell
DOI: 10.7208/chicago/9780226816043.003.0001
[inequality;income;wealth;mobility;distribution]
This volume explores the latest developments in our understanding of income and wealth distribution and mobility. The first section addresses observed patterns of income inequality and shifts in compensation and fluidity that drive or reinforce income inequality. The next focuses on wealth inequality, including the difficulties of defining and measuring wealth. The third section presents new evidence on the intergenerational transmission of inequality and the mechanisms that sustain these patterns. A fourth set of chapters studies the mitigation of inequality, including variations in intervention strategies across time and geography. Finally, issues related to using national accounting data in comparison with survey and microdata are examined. Lack of data, particularly wealth data at the individual or household level in most countries, presents a challenge. Momentum has been building to link multiple sources of survey, administrative and other data in order to mitigate measurement problems in single sources and to provide more comprehensive data on income and wealth. (pages 1 - 16)
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I. Income Inequality
1. In Search of the Roots of American Inequality Exceptionalism: An Analysis Based on Luxembourg Income Study (LIS) Data - Janet C. Gornick, Branko Milanovic, Nathaniel Johnson
DOI: 10.7208/chicago/9780226816043.003.0002
[wage distribution;earnings distributions;income inequality]
Earlier work has established that the US has exceptionally high inequality of disposable household income (i.e., income after accounting for taxes and transfers). There is a debate whether it is due to an unusually high inequality of market (pre-tax-pre-transfer) income or to weak redistribution. In this chapter, we look more deeply at market income inequality, focusing on its main component—labor income—across a group of 24 OECD countries. We disaggregate the working-age population into household types, defined by the number and gender of the household’s earners and the partnership and parenting status of its members. We conclude that within-group inequality of labor incomes in the US is, in almost all groups, high by OECD standards. The roots of US inequality exceptionalism are not to be found in an unusual demographic composition, nor in unusually high or low mean incomes of some demographic groups, but in pervasive high inequality within each of these groups. (pages 19 - 44)
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2. Rising Between-Firm Inequality and Declining Labor Market Fluidity: Evidence of a Changing Job Ladder - John Haltiwanger, James R. Spletzer
DOI: 10.7208/chicago/9780226816043.003.0003
[inequality;firms;job ladder]
Rising earnings inequality in the last few decades is dominated by rising between firm inequality. In turn rising between firm inequality is dominated by rising inter-industry earnings differentials. Over this same period, there has been declining labor market fluidity. The pace of hires and separations has slowed. Viewed from the perspective of hires, there has been an especially large decline in the pace of hires from non-employment. We present evidence that these patterns are connected through the lens of a changing job ladder. Our results suggest it has become more difficult to get on the job ladder, as evidenced by the declining hires from nonemployment. Moreover, the rungs of the job ladder have become further apart. In combination, our results suggest there has been an increase in inequality accompanied by a decline in an important form of economic mobility—that is, it has become more difficult to get on and climb the job ladder. (pages 45 - 68)
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3. United States Earnings Dynamics: Inequality, Mobility, and Volatility - Kevin L. McKinney, John M. Abowd, John Sabelhaus
DOI: 10.7208/chicago/9780226816043.003.0004
[earnings;inequality;mobility volatility;local MSA]
Using data from the Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) infrastructure files, we study changes over time and across sub-national populations in the distribution of real labor earnings. We consider four large MSAs (Detroit, Los Angeles, New York, and San Francisco) for the period 1998 to 2017, with particular attention paid to the sub-periods before, during, and after the Great Recession. For the four large MSAs we analyze, there are clear national trends represented in each of the local areas, the most prominent of which is the increase in the share of earnings accruing to workers at the top of the earnings distribution in 2017 compared with 1998. However, the magnitude of these trends varies across MSAs, with New York and San Francisco showing relatively large increases with Los Angeles somewhere in the middle relative to Detroit whose total real earnings distribution is relatively stable over the period. Our results contribute to the emerging literature on differences between national and regional economic outcomes, exemplifying what will be possible with a new data exploration tool—the Earnings and Mobility Statistics (EAMS) web application—currently under development at the US Census Bureau. (pages 69 - 104)
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4. Evidence from Unique Swiss Tax Data on the Composition and Joint Distribution of Income and Wealth - Isabel Z. Martínez
DOI: 10.7208/chicago/9780226816043.003.0005
[administrative data;tax data;wealth inequality;income inequality;joint distribution]
I compose a unique, new dataset using individual income and wealth tax data from eight Swiss cantons. I describe the data in detail and show that it is representative for Switzerland as a whole. I present a set of empirical facts regarding the distribution of wealth and income in Switzerland. I shed light on the composition of wealth and income along the distribution, including the very top. I find substantial heterogeneity in the composition for different population groups. Real estate wealth is held only by the upper half of the wealth distribution. Due to the strong age-wealth gradient, age has an important influence on the composition as well as on the joint distribution of income and wealth. At any income level except the bottom quintile, retirees are more likely to be higher up in the wealth distribution than non-retirees—including at the very top of the wealth distribution. I find a strong correlation between income and wealth, combined with a pronounced tail dependence, especially at the top. Accounting for age, gender differences in wealth levels are small. They are more pronounced in the income distribution, where women also rely more on transfer income than on labor income compared to men. (pages 105 - 142)
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II. Wealth Inequality
5. The Wealth of Generations, with Special Attention to the Millennials - William G. Gale, Hilary Gelfond, Jason J. Fichtner, Benjamin H. Harris
DOI: 10.7208/chicago/9780226816043.003.0006
[wealth;households;generations;accumulation;income;recession]
We examine household wealth across birth cohorts and over time using data from the Survey of Consumer Finances. We show that although the Great Recession reduced wealth in every age group, longer-term trends indicate the wealth of older age groups has increased while the wealth of younger age groups has declined. A substantial share of these changes, in both directions, can be explained by changes in household demographic and economic characteristics. The median wealth of the millennial generation in 2016 was lower than the wealth of any similarly aged cohort between 1989 and 2007. Millennials have advantages in wealth accumulation relative to previous generations—more education and longer working lives—but several disadvantages—weak prospects for economic growth and delays in home purchase and marriage. The millennial generation contains a higher percentage of minorities than previous generations. We estimate that minority households have tended to accumulate less wealth than Whites, controlling for household characteristics, and the difference appears to be growing over time for Blacks relative to Whites. This applies to the period before the COVID-19 pandemic and is best interpreted as addressing generational wealth patterns through 2016 and providing a pre-COVID benchmark against which future studies can be compared. (pages 145 - 174)
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6. Wealth Transfers and Net Wealth at Death: Evidence from the Italian Inheritance Tax Records, 1995–2016 - Paolo Acciari, Salvatore Morelli
DOI: 10.7208/chicago/9780226816043.003.0007
[wealth transfers;estate concentration;wealth concentration;gifts;taxation of estates;inheritances]
In this chapter we describe a novel source of data on the full record of inheritance tax files in Italy, covering up to 63% of total deceased. The work documents a substantial rise in the total value of inheritance and gifts as a share of national income, from 8.4% in 1995 to 15.1% in 2016. Consistent with the increasing role of total personal net wealth in the economy, the weight of inheritance and gifts in Italy appears relatively high by international standards. Over the same period, total wealth left at death has also become increasingly concentrated. The estates valued at least one million Euro were worth 18.7% of total estate in the mid 1990s and 24.8% in 2016. This chapter also documents that revenues collected from the inheritance tax underwent a large decline from 0.14% to 0.06% of total tax revenue between 1995 and 2016. Data also allow a disaggregated analysis by demographic and geographic characteristics. (pages 175 - 204)
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7. On the Distribution of Estates and the Distribution of Wealth: Evidence from the Dead - Yonatan Berman, Salvatore Morelli
DOI: 10.7208/chicago/9780226816043.003.0008
[wealth inequality;mortality multiplier method;estates;mortality rates;economic history]
Detailed information about the distribution of estates left at death has commonly served as the basis for the estimation of wealth distributions among the living via the mortality multiplier method. The application of detailed mortality rates by demographics and other determinants of mortality is crucial for obtaining an unbiased representation of the wealth distribution of the living. Yet, in this chapter we suggest that a simplified mortality multiplier method, derived using average mortality rates and aggregate tabulations by estate size, may be sufficient to derive compelling estimates of wealth concentration. We show that the application of homogeneous multipliers leads to estimates that are close in level and trend to the concentration of wealth derived in the existing literature with the detailed mortality multiplier method for a variety of countries. The use of mortality rates graduated by estate size does not confute this finding. We also derive the general formal conditions for the similarity between the distributions of wealth of the living and estates at death and discuss the main caveats. These findings may unlock a wide array of aggregate estate tabulations, previously thought to be unusable, for estimating historical trends of wealth concentration. (pages 205 - 220)
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8. Structuring the Analysis of Wealth Inequality Using the Functions of Wealth: A Class-Based Approach - Pirmin Fessler, Martin Schürz
DOI: 10.7208/chicago/9780226816043.003.0009
[wealth;inequality;households;survey data;class;economic stratification]
We integrate concepts from sociology into the economic analysis of inequality and propose a relational approach focusing on different functions of wealth. We operationalize these functions by empirically analyzing the groups of renters, owners, and capitalists. Employing data from the Survey of Consumer Finances for the United States, the Household Finance and Consumption Survey for continental Europe, and the Wealth and Asset Survey for the UK, we find that classifying households based on these functions of wealth aligns well with the income and wealth distribution, in ways that vary considerably across countries. Our approach allows us to distinguish between wealth as a means of production, as a substitute for public wealth (precautionary wealth), and as a source of non-cash income (housing wealth used). We propose new measures of inequality directly linked to social realities. (pages 221 - 248)
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9. Social Security Wealth, Inequality, and Lifecycle Saving - John Sabelhaus, Alice Henriques Volz
DOI: 10.7208/chicago/9780226816043.003.0010
[Social Security;household wealth;lifecycle saving]
Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2019 using detailed labor force history and expectations modules. We use a pseudo-panel approach to empirically demonstrate lifecycle patterns of SSW accumulation and drawdown. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of U.S. wealth inequality but does not reverse the upward trend in top wealth shares. (pages 249 - 286)
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III. Income and Wealth Mobility
10. Parental Education and the Rising Transmission of Income between Generations - Marie Connolly, Catherine Haeck, Jean-William Laliberte
DOI: 10.7208/chicago/9780226816043.003.0011
[social mobility;intergenerational income transmission;income inequality;education;Canada]
Intergenerational mobility has decreased over time for the cohorts of children born between the 1960s and the 1980s in Canada. At the same time, returns to education have gone up. Both factors have contributed to exacerbating income gaps between children of parents with and without secondary education. However, the transmission of residual parental income differences that cannot be accounted for by differences in educational attainment have increased at a faster rate than overall intergenerational income transmission. In addition, overall income mobility has shrunk less in communities that have experienced greater increases in parental high school completion rates over time. There is no significant relationship with changes in university education. Overall, these patterns suggest that fostering high school completion may help slow down the trend decline in intergenerational income mobility. (pages 289 - 316)
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11. Inequality of Opportunity for Income in Denmark and the United States: A Comparison Based on Administrative Data - Pablo A. Mitnik, Anne-Line Helsø, Victoria L. Bryant
DOI: 10.7208/chicago/9780226816043.003.0012
[inequality of opportunity;intergenerational mobility;earnings;family income;taxes and transfers;set estimation;lifecycle bias;identification assumptions;nonparametric approach;administrative data]
We compare inequality of opportunity (IOp) for long-run income in Denmark and the US. We use novel identification assumptions to produce set estimates of IOp in the US relative to Denmark, not just lower-bound estimates of IOp. Based on gender and parental income rank, measured IOp for income is high in the US and not negligible in Denmark. The tax systems and welfare states reduce measured IOp—by more than twice as much in Denmark. In terms of disposable family income per adult, there is more IOp for income in the US than overall income inequality in Denmark, it is higher in the US than in Denmark. IOp is at least 68 percent higher in the US and this result is robust to our inequality index. Our lower-bound estimates of inequality as a share of overall inequality are larger than typically reported for advanced economies. When we account for race and ethnicity, our lower-bound estimate of the US share is almost 58 percent. The distribution of economic opportunities and outcomes is less unequal in Denmark than in the US, and a large share of US income inequality is due to circumstances beyond people’s control. (pages 317 - 382)
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12. Presence and Persistence of Poverty in US Tax Data - Jeff Larrimore, Jacob Mortenson, David Splinter
DOI: 10.7208/chicago/9780226816043.003.0013
[poverty;income mobility;tax data;household links]
This chapter presents new estimates of the level and persistence of poverty among US households since the Great Recession. We build annual household data files using US income tax filings between 2007 and 2018. These data allow us to track individuals over time and measure how tax policies affect poverty trends. Using an after-tax household income measure, we estimate that while roughly 1 in 10 people are in poverty in any given year, over 4 in 10 people spent at least one year in poverty between 2007 and 2018. This implies substantial mobility in and out of poverty—for example, 41 percent of those in poverty in 2007 were out of poverty in the following year. Others spend multiple years in poverty or escape poverty only to fall back into it. Of those in poverty in 2007, one-third were in poverty for at least half of the years through 2018. (pages 382 - 410)
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13. Intergenerational Home Ownership in France over the Twentieth Century - Bertrand Garbinti, Frederique Savignac
DOI: 10.7208/chicago/9780226816043.003.0014
[housing;intergenerational wealth mobility;cohorts]
We estimate the intergenerational correlation in homeownership status between two generations for cohorts covering the 20th century. First, we find higher intergenerational correlation in France compared to previous results obtained for the UK for similar cohorts. Second, the intergenerational correlation is increasing across cohorts, with a relatively stable probability of being a homeowner for children of homeowners over time, and a decreasing probability for children whose parents were not homeowners. Third, the effect of parents’ tenure status is persistent over the children’s life cycle. Fourth, when isolating two subpopulations based on the receipt of intergenerational transfers, we find significant intergenerational correlation in tenure status for children who did not receive any gift or inheritance, as well as for children who received intergenerational transfers, suggesting that other factors such as intergenerational income correlation or the transmission of preferences might also explain this intergenerational correlation. (pages 411 - 436)
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14. Inequality and Mobility over the Past Half-Century Using Income, Consumption, and Wealth - Jonathan D. Fisher, David S. Johnson
DOI: 10.7208/chicago/9780226816043.003.0015
[inequality;mobility;income;consumption;wealth]
We use the Panel Study of Income Dynamics (PSID), which has followed individuals and families over almost five decades. The PSID has been the benchmark source for measuring both intra- and inter-generational mobility, and it is the only data set with income, consumption and wealth. Using income, consumption and wealth provides a more complete picture of the inequality and mobility of individuals and families. We find that overall resources increase from our oldest cohorts to our youngest cohorts, spanning those born from 1916-1925 to those born from 1976-1985 at least for income and consumption. This emerges at the mean and the median and above, while there have been little tangible improvements across cohorts at the 10th percentile. While resources are generally improving, inequality is increasing across cohorts at the same age, and intra-generational mobility is falling or flat. We put inequality and mobility together to show that intra-generational mobility is lower when that cohort is experiencing higher inequality. We are the first to show this intra-generational Great Gatsby Curve, matching the finding that countries with higher inequality experience lower inter-generational mobility. (pages 437 - 456)
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IV. Mitigating Inequality
15. The Accuracy of Tax Imputations: Estimating Tax Liabilities and Credits Using Linked Survey and Administrative Data - Bruce D. Meyer, Derek Wu, Grace Finley, Patrick Langetieg, Carla Medalia, Mark Payne, Alan Plumley
DOI: 10.7208/chicago/9780226816043.003.0016
[taxes;data linkage;survey data;administrative data;EITC;measurement error;income distribution]
We estimate income and payroll taxes using linked survey and administrative tax data from the Comprehensive Income Dataset (CID), and compare them to survey imputations produced by the Census Bureau and using the TAXSIM calculator from the National Bureau of Economic Research. The administrative data include limited tax information for individual returns covering selected line items from Forms 1040, W-2, and 1099-R, and extensive population tax records processed in 2011 covering most line items on Form 1040 and on third-party information returns. We link these to the CPS Annual Social and Economic Supplement for 2010. We describe how we form tax units and estimate tax liabilities and credits. The aggregate estimates are close to each other and to public IRS tabulations than either imputation using survey data alone. The absolute errors of survey-only imputations of federal income taxes and total taxes are 10% and 13% respectively of adjusted gross income. The limited tax data imputations yield mean absolute errors for these taxes of about 2% and 3% of adjusted gross income, respectively. For the EITC, the limited tax data imputation is off by under $20 for a typical family (and over $500 using either survey-only imputation). (pages 459 - 498)
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16. Geographic Inequality in Social Provision: Variation across the US States - Sarah K. Bruch, Janet C. Gornick, Joseph van der Naald
DOI: 10.7208/chicago/9780226816043.003.0017
[safety net policy;social provision;social policy;race;racial inequality;policy design;decentralized policy;subnational]
One of the most significant shifts in the study of inequality is a growing appreciation of geographic inequality, specifically inequality across the 50 US states. We assess the role of state governments in social policy provision, directing attention to the consequences of policy decentralization. Using unique data from the State Safety Net Policy (SSNP) dataset which consists of comparable indicators of state-level social provision, we examine the magnitude of cross-state variation in the generosity of benefits and the inclusiveness of safety net provisions. We find substantial inequality across states in social provision. We find that this cross-state inequality is larger in programs that allow for higher levels of state discretion. Finally, we find that when accorded these higher levels of discretion, states with substantial Black populations use this discretion in ways that limitthe generosity and inclusiveness of social provision. These findings demonstrate how cross-state policy variation can contribute to, and exacerbate, consequential racial disparities in economic security. (pages 499 - 528)
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17. Inequality and the Safety Net in American Cities throughout the Income Distribution, 1929–1940 - James Feigenbaum, Price Fishback, Keoka Grayson
DOI: 10.7208/chicago/9780226816043.003.0018
[income inequality;housing inequality;Great Depression;New Deal]
We compare three measures of inequality in cities across the United States before and during the Great Depression: gini coefficients for income in 1929 and 1933; gini coefficients for housing values in 1930, 1934, and 1940; and the share of families paying federal income taxes. Both levels and changes in housing and income ginis were strongly correlated in 1929/30 and 1933/34. However, the changes in the income gini implied increases in inequality in nearly every sample city between 1929 and 1933 while the changes in the housing gini did not. Incomes tended to become more unequal in cities located in states where income per capita fell the most. Among safety net programs, cities increased their relief spending more in areas with rising inequality. Among New Deal housing programs, the HOLC and the FHA were associated with slight increases in inequality, while the average housing values in most parts of the housing distribution rose more in areas with more FHA insurance of mortgages. (pages 529 - 568)
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18. The EITC and Linking Data for Examining Multigenerational Effects - Randall Akee, Maggie R. Jones, Emilia Simeonova
DOI: 10.7208/chicago/9780226816043.003.0019
[EITC;intergenerational mobility;children]
We study how the largest federal tax-based policy intended to promote work and increase incomes among the poor—the Earned Income Tax Credit (EITC)—affects the socioeconomic standing of children who grew up in households affected by the policy. Using the universe of tax filer records for children linked to their parents, matched with demographic and household information from the decennial Census and American Community Survey data, we exploit exogenous differences by children’s ages in the births and “aging out” of siblings to assess the causal effect of EITC generosity on child outcomes. We focus on assessing upward mobility in the child income distribution, conditional on the parents’ position in the parental income distribution. Our findings suggest significant and mostly positive effects of more generous EITC refunds on the next generation that vary substantially depending on the child’s household type (single-mother or married family) and by the child’s gender. In this chapter, we detail how we define the variation in EITC generosity, explain the construction of the intergenerational link and sibling groups, and provide summary statistics and estimates of average intent-to-treat effects. (pages 569 - 586)
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V. Distributional National Accounts
19. Distributing Personal Income: Trends over Time - Dennis Fixler, Marina Gindelsky, David S. Johnson
DOI: 10.7208/chicago/9780226816043.003.0020
[distribution data estimation;well-being;national income accounting;inequality;growth]
This chapter constructs a distribution of Personal Income for the United States (2007–2016) to investigate the relationship between inequality and macroeconomic growth. We extend a perspective first presented in Fixler and Johnson (2014) and further developed in Fixler et al. (2017) and Fixler, Gindelsky, and Johnson (2018, 2019) to develop a national account-based measure using a decade of publicly available survey, tax, and administrative data. By using (equivalized) households as the base unit of analysis and focusing on a more inclusive definition of income than most inequality studies (i.e., including health, transfers, and financial assets), we improve on existing economic measures of inequality in a meaningful way and bridge the gap between micro data and macro statistics. We produce a wide set of inequality results over the period, drawing a comparison with other studies (including Auten and Splinter 2019, and Piketty, Saez, and Zucman 2018). (pages 589 - 604)
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20. Developing Indicators of Inequality and Poverty Consistent with National Accounts - Richard Tonkin, Sean White, Sofiya Stoyanova, Aly Youssef, Sunny Valentineo Sidhu, Chris Payne
DOI: 10.7208/chicago/9780226816043.003.0021
[inequality;poverty;household survey;national account]
There is interest in developing measures of economic well-being and inequality that are based upon and consistent with the national accounts framework. This approach allows for improved international comparability, greater coherence within countries, and enhanced frequency and timeliness of distributional measurement. A growing body of work seeks to produce distributional national accounts, including that from the OECD-Eurostat Expert Group on Disparities within a National Accounts Framework (EG DNA). In many countries, differences between household surveys and national accounts aggregates make producing such measures challenging. Differences in recorded amounts may reflect issues with survey coverage, nonresponse and underreporting, as well as measurement error in the national accounts. Definitional differencesreflect the different purposes of the micro and macro sources. We build upon recent research in order to develop new indicators of inequality, poverty, and shared prosperity based upon and consistent with national accounts. The UK data used illustrate how such indicators can be produced for various countries. We highlight how such indicators may differ from those based on survey microdata alone and may provide new and complementary insights, supporting the timely monitoring of inequalities and inclusive growth at both the national and international levels. (pages 605 - 624)
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21. Distributional National Accounts: A Macro-Micro Approach to Inequality in Germany - Stefan Bach, Charlotte Bartels, Theresa Neef
DOI: 10.7208/chicago/9780226816043.003.0022
[income distribution;capital accumulation;wage distribution;income composition;top income groups]
This project aims to provide new income inequality series for reunified Germany combining tax data, survey data, and national accounts. Estimating Distributional National Accounts (DINA), we capture 100 percent of national income and can compute the distribution of pretax and posttax incomes for the entire adult population. This allows us to answer the following questions: who has benefited more from economic growth, employees or capital owners? The bottom 50 percent, the middle class or the top 10 percent, 1 percent and 0.1 percent of earners? Further, our chapter is the first to apply the DINA methodology to the analysis of regional disparities. Thirty years after the German reunification, substantial income differences remain between those living in East and West Germany. In the 1990s, West German investors bought real estate and factories in East Germany, following favourable tax incentives. We investigate to what extent capital income generated in East Germany flowing to West German capital owners can explain structural differences between the income distributions in East and West Germany. (pages 625 - 640)
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22. The Distributional Financial Accounts of the United States - Michael Batty, Jesse Bricker, Joseph Briggs, Sarah Friedman, Danielle Nemschoff, Eric Nielsen, Kamila Sommer, Alice Henriques Volz
DOI: 10.7208/chicago/9780226816043.003.0023
[wealth inequality;distributional measures;financial accounts]
This chapter describes the construction of the Distributional Financial Accounts (DFA), a dataset containing quarterly estimates of the distribution of US household wealth since 1989. The DFA builds on two existing Federal Reserve Board statistical products—quarterly aggregate measures of household wealth from the Financial Accounts of the United States, and triennial wealth distribution measures from the Survey of Consumer Finances—to incorporate distributional information into a national accounting framework. The DFA complements other sources by generating distributional statistics that are consistent with macro aggregates by providing quarterly data on a timely basis, and by constructing wealth distributions across demographic characteristics. We encourage policymakers, researchers, and other interested parties to use the DFA to better understand issues related to the distribution of US household wealth. (pages 641 - 678)
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23. Using Tax Data to Better Capture Top Incomes in Official UK Income Inequality Statistics - Dominic Webber, Richard Tonkin, Martin Shine
DOI: 10.7208/chicago/9780226816043.003.0024
[income inequality;statistics;United Kingdom;survey data]
It is widely recognised that household surveys do not fully capture the incomes of the very richest individuals and households, particularly those among the so-called “top 1 percent,” for reasons including non-response and underreporting. As a consequence, estimates based on survey data alone typically understate true levels of inequality. This paper presents new research and analysis to develop a methodology for improving the measurement of the upper tail of the distribution, which is suitable for use in ONS’s official statistics on household income, in terms of being methodologically sound and based on robust academic research; transparent and understandable by users; and an approach where adjustments are made to underlying microdata rather than aggregates. The methods presented in the paper build upon the work of both the UK Department for Work and Pensions (DWP) and Burkhauser et al. (2018a) in employing methods in which survey-based mean incomes for quantile groups at the top of the distribution are replaced by equivalent figures from tax data. The analysis examines two sets of methods developed from these approaches, with variants of each tested to determine the most appropriate methodology to apply in future official statistical releases by ONS. (pages 679 - 700)
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Contributors - Raj Chetty, John N. Friedman, Janet C. Gornick, Barry Johnson, Arthur Kennickell
DOI: 10.7208/chicago/9780226816043.002.0010
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Author Index
Subject Index
