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Deriving Long-Run Inequality Series from Tax Data

  • Andrew Leigh

Prior to the last three decades, regular surveys on household income were rare or non-existent in many developed countries, making it difficult for economists to develop long-run series on income distribution. Using taxation statistics, which tend to be available over a longer time span, I propose a method for imputing the incomes of non-taxpayers, and deriving the underlying distribution of income. Because taxation statistics are typically disaggregated by gender, it is possible to derive separate income distribution series for men and women in countries where individuals file separately. I show that over the past four decades, the distribution of adult male incomes is a good proxy for the distribution of family incomes. Applying this method to Australia, I develop a new annual series for inequality from 1942-2000. Inequality fell in the 1950s and the 1970s, and rose during the 1980s and 1990s – a pattern similar to the United Kingdom.

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File URL: http://cbe.anu.edu.au/researchpapers/cepr/DP476.pdf
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Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 476.

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Length: 34 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:auu:dpaper:476
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  1. Borland, J. & Kennedy, S., 1998. "Earnings Inequality in Australia," CEPR Discussion Papers 389, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  2. Wodon, Quentin & Yitzhaki, Shlomo, 2003. "The effect of using grouped data on the estimation of the Gini income elasticity," Economics Letters, Elsevier, vol. 78(2), pages 153-159, February.
  3. Ryu, Hang K. & Slottje, Daniel J., 1996. "Two flexible functional form approaches for approximating the Lorenz curve," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 251-274.
  4. Mills, Jeffrey A & Zandvakili, Sourushe, 1997. "Statistical Inference via Bootstrapping for Measures of Inequality," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(2), pages 133-50, March-Apr.
  5. Atkinson, Tony & Leigh, Andrew, 2010. "The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century," IZA Discussion Papers 4937, Institute for the Study of Labor (IZA).
  6. A. R. Hall, 1963. "Some Long Period Effects Of The Kinked Age Distribution Of The Population Of Australia 1861–1961," The Economic Record, The Economic Society of Australia, vol. 39(85), pages 43-52, 03.
  7. Xavier Sala-i-Martin, 2002. "The world distribution of income (estimated from individual country distributions)," Economics Working Papers 615, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2002.
  8. Slottje, Daniel J., 1990. "Using grouped data for constructing inequality indices : Parametric vs. non-parametric methods," Economics Letters, Elsevier, vol. 32(2), pages 193-197, February.
  9. McLean, Ian & Richardson, Sue, 1986. "More or Less Equal? Australian Income Distribution in 1933 and 1980," The Economic Record, The Economic Society of Australia, vol. 62(176), pages 67-81, March.
  10. Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, vol. 67(4), pages 747-52, September.
  11. Emmanuel Saez & Michael R. Veall, 2003. "The Evolution of High Incomes in Canada, 1920-2000," Quantitative Studies in Economics and Population Research Reports 382, McMaster University.
  12. 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.
  13. Ann Harding, 1997. "The Suffering Middle: Trends in Income Inequality in Australia, 1982 to 1993-94," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(4), pages 341-358.
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