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

35 Pages Posted: 15 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

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Abstract

Although the majority of research on US income inequality trends is based on public-use March CPS data, a new wave of research using IRS tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates are largely reconciled if the inequality measure and the income distribution are defined in the same way. Using internal CPS data for 1967-2006, we closely match IRS data-based estimates of top income shares reported by Piketty and Saez (2003). Our results imply that any inequality increases since 1993 are concentrated among the top 1 percent of the distribution.

Keywords: March CPS, top income shares, US income inequality, IRS tax return data

JEL Classification: D31, C81

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. IZA Discussion Paper No. 4426, Available at SSRN: https://ssrn.com/abstract=1489249

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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United Kingdom

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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Washington, DC 20551
United States

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