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
Date Written: June 2007
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: Suggested Citation