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Do Piketty and Saez Misstate Income Inequality? Critiquing the Critiques

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  • George Mechling
  • Stephen Miller
  • Ron Konecny

Abstract

A large body of literature points to sharply growing income inequality over the past half century. The Piketty and Saez dataset that measures income distribution provides empirical support for this claim. Our article evaluates three prominent criticisms of this dataset as well as the responses of Piketty and Saez to these criticisms. One key argument against using their dataset is that Piketty and Saez do not control for income shifting by top income earners in response to the Tax Reform Act of 1986 (TRA86) and thus overstate income inequality. In evaluating this criticism we find that a segment of their dataset likely understates income inequality; this is just the opposite of what critics assert. This implies that the Piketty–Saez dataset is a valuable resource for income inequality research and that scholars can use it to build more refined, accurate and insightful measures of income inequality.

Suggested Citation

  • George Mechling & Stephen Miller & Ron Konecny, 2017. "Do Piketty and Saez Misstate Income Inequality? Critiquing the Critiques," Review of Political Economy, Taylor & Francis Journals, vol. 29(1), pages 30-46, January.
    • Handle: RePEc:taf:revpoe:v:29:y:2017:i:1:p:30-46
    DOI: 10.1080/09538259.2017.1255439
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    References listed on IDEAS

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    1. Richard V. Burkhauser & Shuaizhang Feng & Stephen P. Jenkins & Jeff Larrimore, 2009. "Recent trends in top income shares in the USA: Reconciling estimates from March CPS and IRS tax return data," Working Papers 139, ECINEQ, Society for the Study of Economic Inequality.
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    4. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
    5. Richard V. Burkhauser & Shuaizhang Feng & Stephen P. Jenkins & Jeff Larrimore, 2012. "Recent Trends in Top Income Shares in the United States: Reconciling Estimates from March CPS and IRS Tax Return Data," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 371-388, May.
    6. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    7. Burkhauser, Richard V. & Larrimore, Jeff & Simon, Kosali I., 2012. "A "Second Opinion" on the Economic Health of the American Middle Class," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(1), pages 7-32, March.
    8. Emmanuel Saez, 2004. "Reported Incomes and Marginal Tax Rates, 1960–2000: Evidence and Policy Implications," NBER Chapters, in: Tax Policy and the Economy, Volume 18, pages 117-174, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Marisa Civardi & Renata Targetti Lenti, 2018. "Can the link between functional and personal income distribution enhance the analysis of inequality?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(2), pages 137-156, June.
    2. Antonio Saravia, 2019. "Pope Francis on Poverty and Economic Inequality: Good Intentions, Unfortunate Ideas," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 34(Fall 2019), pages 59-88.
    3. Dustin Chambers & Colin O’Reilly, 2022. "The economic theory of regulation and inequality," Public Choice, Springer, vol. 193(1), pages 63-78, October.
    4. Sean E. Mulholland, 2019. "Stratification by regulation: Are bootleggers and Baptists biased?," Public Choice, Springer, vol. 180(1), pages 105-130, July.
    5. Aziz Z. Huq, 2022. "The Supreme Court and the Dynamics of Democratic Backsliding," The ANNALS of the American Academy of Political and Social Science, , vol. 699(1), pages 50-65, January.

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