Using the P90/P10 Index to Measure US Inequality Trends with Current Population Survey Data: A View from Inside the Census Bureau Vaults

51 Pages Posted: 5 Jul 2007

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)

Date Written: June 2007

Abstract

The March Current Population Survey (CPS) is the primary data source for estimation of levels and trends in labor earnings and income inequality in the USA. Time-inconsistency problems related to top coding in theses data have led many researchers to use the ratio of the 90th and 10th percentiles of these distributions (P90/P10) rather than a more traditional summary measure of inequality. With access to public use and restricted-access internal CPS data, and bounding methods, we show that using P90/P10 does not completely obviate time-inconsistency problems, especially for household income inequality trends. Using internal data, we create consistent cell mean values for all top-coded public use values that, when used with public use data, closely track inequality trends in labor earnings and household income using internal data. But estimates of longer-term inequality trends with these corrected data based on P90/P10 differ from those based on the Gini coefficient. The choice of inequality measure matters.

Keywords: inequality, income, earnings, Current Population Survey, decile ratio, Gini coefficient

JEL Classification: D3, J3, C8

Suggested Citation

Burkhauser, Richard V. and Feng, Shuaizhang and Jenkins, Stephen P., Using the P90/P10 Index to Measure US Inequality Trends with Current Population Survey Data: A View from Inside the Census Bureau Vaults (June 2007). IZA Discussion Paper No. 2839, US Census Bureau Center for Economic Studies Paper No. CES-WP-07-17, Available at SSRN: https://ssrn.com/abstract=998222

Richard V. Burkhauser

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

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States

University of Melbourne, Melbourne Institute ( email )

Level 5, FBE Building, 111 Barry Street
161 Barry Street
Carlton, VIC 3053
Australia

Shuaizhang Feng

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

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Princeton University

22 Chambers Street
Princeton, NJ 08544-0708
United States

IZA Institute of Labor Economics

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

Stephen P. Jenkins (Contact Author)

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

Houghton Street
London, England WC2A 2AE
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 )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 120 687 3374 (Phone)
+44 120 687 3151 (Fax)

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