Estimating Trends in Us Income Inequality Using the Current Population Survey: the Importance of Controlling for Censoring

56 Pages Posted: 18 Aug 2008 Last revised: 5 Sep 2008

See all articles by Richard V. Burkhauser

Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM); University of Melbourne, Melbourne Institute

Shuaizhang Feng

Shanghai University of Finance and Economics - Department of Economics; Princeton University; IZA Institute of Labor Economics

Stephen P. Jenkins

London School of Economics & Political Science (LSE) - Department of Social Policy and Administration; Institute for the Study of Labor (IZA); University of Essex - Institute for Social and Economic Research (ISER)

Jeff Larrimore

Board of Governors of the Federal Reserve System

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Date Written: August 2008

Abstract

Using internal and public use March Current Population Survey (CPS) data, we analyze trends in US income inequality (1975-2004). We find that the upward trend in income inequality prior to 1993 significantly slowed thereafter once we control for top coding in the public use data and censoring in the internal data. Because both series do not capture trends at the very top of the income distribution, we use a multiple imputation approach in which values for censored observations are imputed using draws from a Generalized Beta distribution of the Second Kind (GB2) fitted to internal data. Doing so, we find income inequality trends similar to those derived from unadjusted internal data. Our trend results are generally robust to the choice of inequality index, whether Gini coefficient or other commonly-used indices. When we compare our best estimates of the income shares held by the richest tenth with those reported by Piketty and Saez (2003), our trends fairly closely match their trends, except for the top 1 percent of the distribution. Thus, we argue that if United States income inequality has been substantially increasing since 1993, such increases are confined to this very high income group.

Suggested Citation

Burkhauser, Richard V. and Feng, Shuaizhang and Jenkins, Stephen P. and Larrimore, Jeff, Estimating Trends in Us Income Inequality Using the Current Population Survey: the Importance of Controlling for Censoring (August 2008). NBER Working Paper No. w14247, Available at SSRN: https://ssrn.com/abstract=1231695

Richard V. Burkhauser (Contact Author)

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

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University of Melbourne, Melbourne Institute ( email )

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Shuaizhang Feng

Shanghai University of Finance and Economics - Department of Economics ( email )

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China

Princeton University

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IZA Institute of Labor Economics

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Stephen P. Jenkins

London School of Economics & Political Science (LSE) - Department of Social Policy and Administration ( email )

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United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex - Institute for Social and Economic Research (ISER) ( email )

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+44 120 687 3151 (Fax)

Jeff Larrimore

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

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