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Dealing With Incomplete Household Panel Data in Inequality Research

  • Joachim R. Frick

    (DIW Berlin, Berlin, Germany and Technische Universitaet Berlin)

  • Markus M. Grabka

    (DIW Berlin, Berlin, Germany and Technische Universitaet Berlin)

  • Olaf Groh-Samberg

    (University of Bremen, Bremen, Germany)

In trying to capture complete within-household heterogeneity, household panel surveys typically try to interview all adult household members. Following from this, such surveys tend to suffer from partial unit nonresponse (PUNR), that is, the nonresponse of at least one member of an otherwise participating household, most likely yielding an underestimation of aggregate household income. Using data from the German Socio-Economic Panel (SOEP), the authors evaluate four different strategies to deal with this phenomenon: (a) ignorance, that is, assuming the missing individual’s income to be zero; (b) adjustment of the equivalence scale to account for differences in household size and composition; (c) elimination of all households observed to suffer PUNR and reweighting of households observed to be at risk of but not affected by PUNR; and (d) longitudinal imputation of the missing income components. The aim of this article is to show how the choice of technique affects substantive results in inequality research. The authors find indications of substantial bias on income inequality and poverty as well as on income mobility.

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Article provided by in its journal Sociological Methods & Research.

Volume (Year): 41 (2012)
Issue (Month): 1 (February)
Pages: 89-123

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Handle: RePEc:sae:somere:v:41:y:2012:i:1:p:89-123
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  1. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  2. repec:ese:iserwp:2008-42 is not listed on IDEAS
  3. Kapteyn, Arie & Michaud, Pierre-Carl & Smith, James P. & van Soest, Arthur, 2006. "Effects of Attrition and Non-Response in the Health and Retirement Study," IZA Discussion Papers 2246, Institute for the Study of Labor (IZA).
  4. Frick, Joachim R. & Grabka, Markus M., 2003. "Imputed Rent and Income Inequality: A Decomposition Analysis for Great Britain, West Germany and the U.S," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 513-537.
  5. Jens Bonke & Hans Uldall-Poulsen, 2007. "Why do families actually pool their income? Evidence from Denmark," Review of Economics of the Household, Springer, vol. 5(2), pages 113-128, June.
  6. Joachim R. Frick & Markus M. Grabka, 2007. "Item Non-response and Imputation of Annual Labor Income in Panel Surveys from a Cross-National Perspective," SOEPpapers on Multidisciplinary Panel Data Research 49, DIW Berlin, The German Socio-Economic Panel (SOEP).
  7. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
  8. Fields, Gary S & Ok, Efe A, 1999. "Measuring Movement of Incomes," Economica, London School of Economics and Political Science, vol. 66(264), pages 455-71, November.
  9. Markus M. Grabka & Joachim R. Frick, 2008. "The Shrinking German Middle Class: Signs of Long-Term Polarization in Disposable Income?," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 4(4), pages 21-27.
  10. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
  11. Cheti Nicoletti & Franco Peracchi, 2006. "The effects of income imputation on microanalyses: evidence from the European Community Household Panel," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 169(3), pages 625-646.
  12. Smeeding, Timothy M & Weinberg, Daniel H, 2001. "Toward a Uniform Definition of Household Income," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(1), pages 1-24, March.
  13. Daniel H. Hill & Robert J. Willis, 2001. "Reducing Panel Attrition: A Search for Effective Policy Instruments," Journal of Human Resources, University of Wisconsin Press, vol. 36(3), pages 416-438.
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