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Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring

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Author Info
Burkhauser, Richard V. () (Cornell University)
Feng, Shuaizhang () (Princeton University)
Jenkins, Stephen P. () (University of Essex)
Larrimore, Jeff () (Cornell University)

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Abstract

Using internal and public use March Current Population Survey data, we analyze trends in US income inequality (1975–2004). Using a multiple imputation approach where values for censored observations are imputed using draws from a Generalized Beta distribution of the Second Kind, we find that the upward trend in income inequality significantly slowed after 1993. Our results closely match the income share trends reported by Piketty and Saez (2003) except for within the top 1 percent of the distribution. Thus, we argue that if inequality has increased substantially since 1993, such increases are confined to this very high income group.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3690.

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Length: 41 pages
Date of creation: Sep 2008
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Handle: RePEc:iza:izadps:dp3690

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Related research
Keywords: US income inequality; time trend; CPS; censoring; topcoding; inequality;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September. [Downloadable!] (restricted)
  2. Richard Burkhauser & Jeff Larrimore, 2008. "Trends in the Relative Household Income of Working-Age Men with Work Limitations: Correcting the Record Using Internal Current Population Survey Data," Working Papers 08-05, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  3. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166 Elsevier. [Downloadable!] (restricted)
  4. Jeff Larrimore & Richard Burkhauser & Shuaizhang Feng & Laura Zayatz, 2008. "Consistent Cell Means for Topcoded Incomes in the Public Use March CPS (1976-2007)," Working Papers 08-06, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  5. Mary C. Daly & Robert G. Valletta, 2006. "Inequality and Poverty in United States: The Effects of Rising Dispersion of Men's Earnings and Changing Family Behaviour," Economica, London School of Economics and Political Science, vol. 73(289), pages 75-98, 02. [Downloadable!] (restricted)
  6. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April. [Downloadable!] (restricted)
    Other versions:
  7. Peter Gottschalk & Sheldon Danziger, 2005. "INEQUALITY OF WAGE RATES, EARNINGS AND FAMILY INCOME IN THE UNITED STATES, 1975-2002 ," Review of Income and Wealth, Blackwell Publishing, vol. 51(2), pages 231-254, 06. [Downloadable!] (restricted)
  8. Feng, Shuaizhang & Burkhauser, Richard V. & Butler, J.S., 2006. "Levels and Long-Term Trends in Earnings Inequality: Overcoming Current Population Survey Censoring Problems Using the GB2 Distribution," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 57-62, January. [Downloadable!] (restricted)
  9. Richard V. Burkhauser & Shuaizhang Feng & Stephen P. Jenkins, 2007. "Using the P90/P10 Index to Measure US Inequality Trends with Current Population Survey Data: A View from Inside the Census Bureau Vaults," IZA Discussion Papers 2839, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Stephen P. Jenkins & Richard V. Burkhauser & Shuaizhang Feng & Jeff Larrimore, 2009. "Measuring inequality using Censored data: A multiple imputation approach," Working Papers 108, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
    Other versions:
  11. Joel Slemrod, 1995. "High-Income Families and the Tax Changes of the 1980s: The Anatomy of Behavioral Response," NBER Working Papers 5218, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Richard V. Burkhauser & Kenneth A. Couch & Andrew Houtenville & Ludmila Rovba, 2004. "Income Inequality in the 1990s: Re-Forging a Lost Relationship?," Working papers 2004-11, University of Connecticut, Department of Economics. [Downloadable!]
  13. Krüger, Dirk & Perri, Fabrizio, 2002. "Does Income Inequality Lead to Consumption Inequality?," CEPR Discussion Papers 3583, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February. [Downloadable!] (restricted)
  15. Fichtenbaum, Rudy & Shahidi, Hushang, 1988. "Truncation Bias and the Measurement of Income Inequality," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 335-37, July.
  16. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, 06. [Downloadable!] (restricted)
  17. Richard Burkhauser & Takashi Oshio & Ludmila Rovba, 2006. "How the Distribution of After-Tax Income Changed Over the 1990s Business Cycle: A Comparison of the United States, Great Britain, Germany and Japan," Working Papers wp145, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
    Other versions:
  18. Feenberg, D.R. & Poterba, J.M., 1992. "Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns," Working papers 92-16, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  19. Burkhauser, Richard V. & Butler, J. S. & Feng, Shuaizhang & Houtenville, Andrew J., 2004. "Long term trends in earnings inequality: what the CPS can tell us," Economics Letters, Elsevier, vol. 82(2), pages 295-299, February. [Downloadable!] (restricted)
  20. Finis Welch, 1999. "In Defense of Inequality," American Economic Review, American Economic Association, vol. 89(2), pages 1-17, May. [Downloadable!] (restricted)
  21. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June. [Downloadable!] (restricted)
  22. Cowell, Frank A & Victoria-Feser, Maria-Pia, 1996. "Robustness Properties of Inequality Measures," Econometrica, Econometric Society, vol. 64(1), pages 77-101, January. [Downloadable!] (restricted)
  23. Jenkins, S., 1988. "The Measurement Of Economic Inequality," Papers 170, Australian National University - Department of Economics.
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  1. repec:ese:iserwp: is not listed on IDEAS
  2. Robert J. Gordon, 2009. "Misperceptions About the Magnitude and Timing of Changes in American Income Inequality," NBER Working Papers 15351, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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