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Recent trends in top income shares in the USA: reconciling estimates from March CPS and IRS tax return data

  • Burkhauser, Richard V.
  • Feng, Shuaizhang
  • Jenkins, Stephen P.
  • Larrimore, Jeff

Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967-2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993-2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2009-27.

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Date of creation: 14 Sep 2009
Date of revision:
Publication status: published
Handle: RePEc:ese:iserwp:2009-27
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  1. 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 335-37, July.
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  11. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2008. "Estimating Trends in U.S. Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring," Working Papers 08-25, Center for Economic Studies, U.S. Census Bureau.
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  14. Richard V. Burkhauser & Shuaizhang Feng & Stephen P. Jenkins, 2007. "Using the P90/P10 Index to Measure US Inequality Trends with Current Population Survey Data: A View from Inside the Census Bureau Vaults," Discussion Papers of DIW Berlin 699, DIW Berlin, German Institute for Economic Research.
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  25. repec:oup:qjecon:v:118:y:2003:i:1:p:1-39 is not listed on IDEAS
  26. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2009. "From Bottom To Top: The Entire Income Distribution In Germany, 1992-2003," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 303-330, 06.
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