Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data

45 Pages Posted: 8 Sep 2009 Last revised: 9 Oct 2009

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

Multiple version iconThere are 3 versions of this paper

Date Written: September 2009

Abstract

Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967-2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993-2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.

Suggested Citation

Burkhauser, Richard V. and Feng, Shuaizhang and Jenkins, Stephen P. and Larrimore, Jeff, Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data (September 2009). NBER Working Paper No. w15320, Available at SSRN: https://ssrn.com/abstract=1469115

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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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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Institute for the Study of Labor (IZA)

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

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Jeff Larrimore

Board of Governors of the Federal Reserve System ( email )

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United States

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