Correcting the Underestimation of Top Incomes: Combining Data from Income Tax Reports and the Brazilian 2010 Census

Abstract

To deal with the problem of underestimation of top incomes in household surveys, we propose a methodology to combine the income distributions of the Brazilian 2010 Census (survey) and of 2010 DIRPF (personal income tax reports). The method consists on estimating a system of non-response weights that uses as frame the tax register and is applied to the top of the distribution. After applying this calibration methodology, we decompose inequality income sources. Correcting survey distributions with tax data increases the contribution of non-labor income to inequality, as the case of the Brazilian Census shows. Changes in the methodology do not affect the results substantially.

Keywords: Income inequality, Social stratification, Top incomes, Rich, Income tax

JEL Classification: D63