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Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data

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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)
Abstract

Although the majority of research on US income inequality trends is based on public-use March CPS data, a new wave of research using IRS tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates are largely reconciled if the inequality measure and the income distribution are defined in the same way. Using internal CPS data for 1967-2006, we closely match IRS data-based estimates of top income shares reported by Piketty and Saez (2003). Our results imply that any inequality increases since 1993 are concentrated among the top 1 percent of the distribution.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4426.

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Date of creation: Sep 2009
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Handle: RePEc:iza:izadps:dp4426

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Related research
Keywords: March CPS; top income shares; US income inequality; IRS tax return data;

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. Anthony B. Atkinson & Andrew Leigh, 2007. "The Distribution of Top Incomes in Australia," The Economic Record, The Economic Society of Australia, vol. 83(262), pages 247-261, 09. [Downloadable!] (restricted)
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  3. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2009. "From Bottom To Top: The Entire Income Distribution In Germany, 1992-2003," Review of Income and Wealth, Blackwell Publishing, vol. 55(2), pages 303-330, 06. [Downloadable!] (restricted)
  4. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland Over the Twentieth Century," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 412-421, 04/05. [Downloadable!] (restricted)
  5. 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)
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  6. Andrew Leigh, 2007. "How Closely Do Top Income Shares Track Other Measures of Inequality?," Economic Journal, Royal Economic Society, vol. 117(524), pages F619-F633, November. [Downloadable!] (restricted)
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  7. 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)
  8. 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.
  9. Emmanuel Saez & Michael R. Veall, 2005. "The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence," American Economic Review, American Economic Association, vol. 95(3), pages 831-849, June. [Downloadable!]
  10. Joel Slemrod, 1996. "High-Income Families and the Tax Changes of the 1980s: The Anatomy of Behavioral Response," NBER Chapters, in: Empirical Foundations of Household Taxation, pages 169-192 National Bureau of Economic Research, Inc. [Downloadable!]
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  11. Thomas Piketty, 2003. "Income Inequality in France, 1901-1998," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1004-1042, October. [Downloadable!] (restricted)
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  12. Woodbury, Stephen A & Hamermesh, Daniel S, 1992. "Taxes, Fringe Benefits and Faculty," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 287-96, May. [Downloadable!] (restricted)
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  13. Bishop, John A & Chiou, Jong-Rong & Formby, John P, 1994. "Truncation Bias and the Ordinal Evaluation of Income Inequality," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(1), pages 123-27, January.
  14. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," American Economic Review, American Economic Association, vol. 96(2), pages 200-205, May. [Downloadable!]
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  15. Stephen P. Jenkins, 2009. "Distributionally-Sensitive Inequality Indices And The Gb2 Income Distribution," Review of Income and Wealth, Blackwell Publishing, vol. 55(2), pages 392-398, 06. [Downloadable!] (restricted)
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Cited by:
(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. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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