IDEAS home Printed from https://ideas.repec.org/a/bla/revinw/v55y2009i1p166-185.html
   My bibliography  Save this article

Using The P90/P10 Index To Measure U.S. Inequality Trends With Current Population Survey Data: A View From Inside The Census Bureau Vaults

Author

Listed:
  • Richard V. Burkhauser
  • Shuaizhang Feng
  • Stephen P. Jenkins

Abstract

The March Current Population Survey (CPS) is the primary data source for estimation of levels and trends in U.S. earnings and income inequality. However, time‐inconsistency problems related to top coding lead many CPS users to measure inequality via the ratio of the 90th to the 10th percentile (P90/P10) rather than by more traditional summary measures. With access to public use and restricted‐access internal CPS data, and by applying bounding methods, we show that using P90/P10 does not completely obviate time‐inconsistency problems, especially in capturing 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 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 still matters.

Suggested Citation

  • Richard V. Burkhauser & Shuaizhang Feng & Stephen P. Jenkins, 2009. "Using The P90/P10 Index To Measure U.S. Inequality Trends With Current Population Survey Data: A View From Inside The Census Bureau Vaults," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(1), pages 166-185, March.
  • Handle: RePEc:bla:revinw:v:55:y:2009:i:1:p:166-185
    DOI: 10.1111/j.1475-4991.2008.00305.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1475-4991.2008.00305.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1475-4991.2008.00305.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    2. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    3. Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, February.
    4. Andrea Brandolini, 2006. "Measurement of Income Distribution in Supranational Entities: The Case of the European Union," LIS Working papers 452, LIS Cross-National Data Center in Luxembourg.
    5. Richard V. Burkhauser & Kenneth A. Couch & Andrew Houtenville & Ludmila Rovba, 2003. "Income Inequality in the 1990s: Re-forging a Lost Relationship," Journal of Income Distribution, Ad libros publications inc., vol. 12(3-4), pages 2-2, September.
    6. 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 335-337, July.
    7. 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, May.
    8. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U. S. Wage Inequality: Re-Assessing the Revisionists," Harvard Institute of Economic Research Working Papers 2095, Harvard - Institute of Economic Research.
    9. 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.
    10. Lynn Karoly & Gary Burtless, 1995. "Demographic change, rising earnings inequality, and the distribution of personal well-being, 1959–1989," Demography, Springer;Population Association of America (PAA), vol. 32(3), pages 379-405, August.
    11. 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.
    12. 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 1333-1381, September.
    13. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
    14. Manski, C.F., 1990. "The Selection Problem," Working papers 90-12, Wisconsin Madison - Social Systems.
    15. Arthur Alderson & Jason Beckfield & Francois Nielsen, 2005. "Exactly How has Income Inequality Changed? Patterns of Distributional Change in Core Societies," LIS Working papers 422, LIS Cross-National Data Center in Luxembourg.
    16. Peter Gottschalk & Mary Joyce, 1998. "Cross-National Differences In The Rise In Earnings Inequality: Market And Institutional Factors," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 489-502, November.
    17. Robert L. Brown & Steven G. Prus, 2006. "Income Inequality over the Later-Life Course: A Comparative Analysis of Seven OECD Countries," Social and Economic Dimensions of an Aging Population Research Papers 154, McMaster University.
    18. 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.
    19. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    20. Richard V. Burkhauser & Takashi Oshio & Ludmila Rovba, 2007. "Winners and Losers over the 1990s Business Cycles in Germany, Great Britain, Japan, and the United States," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 75-84.
    21. Trejo, Stephen J, 1997. "Why Do Mexican Americans Earn Low Wages?," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1235-1268, December.
    22. 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 410-442, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2011. "Estimating trends in US income inequality using the Current Population Survey: the importance of controlling for censoring," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(3), pages 393-415, September.
    2. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc.
    3. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute of Labor Economics (IZA).
    4. Nicolas Pistolesi, 2009. "Inequality of opportunity in the land of opportunities, 1968–2001," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 7(4), pages 411-433, December.
    5. Gernandt Johannes & Pfeiffer Friedhelm, 2007. "Rising Wage Inequality in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(4), pages 358-380, August.
    6. 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.
    7. Paulo M.M. Rodrigues & João Nicolau & Pedro Raposo, 2020. "Measuring wage inequality under right censoring," Working Papers w202008, Banco de Portugal, Economics and Research Department.
    8. Mukoyama, Toshihiko & Sahin, Aysegl, 2009. "Why did the average duration of unemployment become so much longer?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 200-209, March.
    9. Machin, Stephen & Van Reenen, John, 2007. "Changes in wage inequality," LSE Research Online Documents on Economics 4667, London School of Economics and Political Science, LSE Library.
    10. Fredrik Andersson & Elizabeth E. Davis & Matthew L. Freedman & Julia I. Lane & Brian P. Mccall & Kristin Sandusky, 2012. "Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(4), pages 779-810, October.
    11. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 843-881.
    12. Rinawi, Miriam & Backes-Gellner, Uschi, 2015. "Occupational Skills and the Evolution of Wages," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112801, Verein für Socialpolitik / German Economic Association.
    13. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    14. Fabián Slonimczyk, 2013. "Earnings inequality and skill mismatch in the U.S.: 1973–2002," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(2), pages 163-194, June.
    15. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April.
    16. Xing, Chunbing & Li, Shi, 2012. "Residual wage inequality in urban China, 1995–2007," China Economic Review, Elsevier, vol. 23(2), pages 205-222.
    17. Philip Armour & Richard V. Burkhauser & Jeff Larrimore, 2016. "Using The Pareto Distribution To Improve Estimates Of Topcoded Earnings," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1263-1273, April.
    18. Maarten Goos & Alan Manning, 2005. "Can a More Nuanced View of Skill Biased Technological Change Explain the Recent Changes in Wage Inequality ?," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 37-45.
    19. Frederiksen, Anders & Poulsen, Odile, 2010. "Increasing Income Inequality: Productivity, Bargaining and Skill-Upgrading," IZA Discussion Papers 4791, Institute of Labor Economics (IZA).
    20. repec:pri:cepsud:113krusell is not listed on IDEAS
    21. Slonimczyk, Fabián & Skott, Peter, 2012. "Employment and distribution effects of the minimum wage," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 245-264.

    More about this item

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:revinw:v:55:y:2009:i:1:p:166-185. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/iariwea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iariwea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.