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

Author

Listed:
  • Richard V. Burkhauser

    (Cornell University and University of Melbourne)

  • Shuaizhang Feng

    (Shanghai University of Finance and Economics)

  • Stephen P. Jenkins

    (University of Essex)

  • Jeff Larrimore

    (U.S. Joint Committee on Taxation)

Abstract

Although most U.S. income inequality research is based on public use March CPS data, a new wave of research using IRS tax return data reports substantially faster inequality growth for recent years. We show that these apparently inconsistent estimates are largely reconciled when the income distribution and inequality are defined the same way. Using internal CPS data for 1967 to 2006, we show that CPS-based estimates of top income shares are similar to IRS data-based estimates reported by Piketty and Saez (2003). Our results imply that income inequality changes since 1993 are largely driven by changes in incomes of the top 1%. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • 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.
  • Handle: RePEc:tpr:restat:v:94:y:2012:i:2:p:371-388
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    Keywords

    top income shares; income inequality; March CPS; IRS tax return data;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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