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

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Author Info
Stephen P. Jenkins () (ISER, University of Essex)
Shuaizhang Feng (Shanghai University of Finance and Economics)
Richard V. Burkhauser (Cornell University)

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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.

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Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 72.

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Length: 49 pages
Date of creation: 2007
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Handle: RePEc:inq:inqwps:ecineq2007-72

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

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Find related papers by JEL classification:
D3 - Microeconomics - - Distribution
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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  2. 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.
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  8. John Pencavel, 2006. "A Life Cycle Perspective on Changes in Earnings Inequality among Married Men and Women," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 232-242, 08. [Downloadable!] (restricted)
  9. 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)
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  13. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June. [Downloadable!] (restricted)
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(explanations, 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. Burkhauser, Richard V. & Feng, Shuaizhang & Jenkins, Stephen P. & Larrimore, Jeff, 2008. "Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring," IZA Discussion Papers 3690, Institute for the Study of Labor (IZA). [Downloadable!]
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  3. Richard V. Burkhauser & Shuaizhang Feng & Jeff Larrimore, 2008. "Measuring Labor Earnings Inequality using Public-Use March Current Population Survey Data: The Value of Including Variances and Cell Means When Imputing Topcoded Values," NBER Working Papers 14458, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Richard V. Burkhauser & Takashi Oshio & Ludmila Rovba, 2007. "How the Distribution of After-Tax Income Changed over the 1990s Business Cycle: A Comparison of the United States, Great Britain, Germany and Japan," SOEPpapers 35, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
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  5. Anna Fräßdorf & Markus M. Grabka & Johannes Schwarze, 2008. "The Impact of Household Capital Income on Income Inequality: A Factor Decomposition Analysis for Great Britain, Germany and the USA," SOEPpapers 104, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
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  6. Jeff Larrimore & Richard V. Burkhauser & Shuaizhang Feng & Laura Zayatz, 2008. "Consistent Cell Means for Topcoded Incomes in the Public Use March CPS (1976-2007)," NBER Working Papers 13941, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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