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Top Income Adjustments and Inequality: An Investigation of the EU-SILC

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  • Carranza, Rafael
  • Morgan, Marc
  • Nolan, Brian

Abstract

In this paper we bridge the gap between two different approaches to measure inequality: one based on household surveys and summary measures such as the Gini, and the other focused on taxable income and top income shares. We explore how these approaches adjust the Gini for equivalised household income in 26 European countries over 2003-2017 using the EU-SILC, focusing on the World Inequality Database (WID) adjustment as proposed in Blanchet et al. (2020). On average, the Gini increases by around 2.4 points as a result of the WID adjustment, for both gross and disposable income, with notable differences across countries, affecting rankings, despite limited impact on trends. We find that differences in inequality depend less on the adjustment method and more on whether it relies on external data sources such as tax data. In fact, SILC countries that rely on administrative register data experience relatively small changes in inequality after the WID adjustment. For recent years, we find that the Gini for 'non-register' countries increases by 2.8 points on average while in 'register' countries it does so by 0.9 points. We conclude by proposing ways in which household surveys can improve their representativeness of income and living conditions.

Suggested Citation

  • Carranza, Rafael & Morgan, Marc & Nolan, Brian, 2021. "Top Income Adjustments and Inequality: An Investigation of the EU-SILC," INET Oxford Working Papers 2021-16, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
  • Handle: RePEc:amz:wpaper:2021-16
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    1. Stephen P. Jenkins, 2022. "Top-income adjustments and official statistics on income distribution: the case of the UK," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(1), pages 151-168, March.

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    More about this item

    Keywords

    Inequality; Reweighting; Survey Representativeness; Top incomes;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative

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