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What has been happening to UK income inequality since the mid-1990s? Answers from reconciled and combined household survey and tax return data

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  • Burkhauser, Richard V.
  • Hérault, Nicolas
  • Jenkins, Stephen P.
  • Wilkins, Roger

Abstract

Estimates of UK income inequality trends differ substantially according to whether estimates are based on household survey data (used for official statistics) or tax return data (used in the top incomes literature). We reconcile differences in variable definitions and combine survey and tax return data in order to take advantage of the much better coverage of top incomes in the latter, and provide improved estimates of UK inequality trends since the mid-1990s. We show there was a marked increase in income inequality in the early 2000s that survey-based estimates do not reveal, and our conclusions are robust to changes in the definitions of income, income-sharing unit, and summary inequality measure. In addition, our reconciled and combined data provide more comparable estimates of UK-US inequality trends than the top incomes literature to date.

Suggested Citation

  • Burkhauser, Richard V. & Hérault, Nicolas & Jenkins, Stephen P. & Wilkins, Roger, 2016. "What has been happening to UK income inequality since the mid-1990s? Answers from reconciled and combined household survey and tax return data," ISER Working Paper Series 2016-03, Institute for Social and Economic Research.
    • Handle: RePEc:ese:iserwp:2016-03
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    References listed on IDEAS

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    1. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    2. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 1-41.
    3. Andrew Leigh, 2007. "How Closely Do Top Income Shares Track Other Measures of Inequality?," Economic Journal, Royal Economic Society, vol. 117(524), pages 619-633, November.
    4. Philip Armour & Richard V. Burkhauser & Jeff Larrimore, 2013. "Deconstructing Income and Income Inequality Measures: A Crosswalk from Market Income to Comprehensive Income," American Economic Review, American Economic Association, vol. 103(3), pages 173-177, May.
    5. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
    6. A. B. Atkinson, 2005. "Top incomes in the UK over the 20th century," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(2), pages 325-343.
    7. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
    8. Alvaredo, Facundo, 2011. "A note on the relationship between top income shares and the Gini coefficient," Economics Letters, Elsevier, vol. 110(3), pages 274-277, March.
    9. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
    10. Philip Armour & Richard V. Burkhauser & Jeff Larrimore, 2014. "Levels and Trends in U.S. Income and its Distribution: A Crosswalk from Market Income towards a Comprehensive Haig-Simons Income Approach," Southern Economic Journal, Southern Economic Association, vol. 81(2), pages 271-293, October.
    11. Anthony Atkinson & Thomas Piketty, 2007. "Top incomes over the twentieth century: A contrast between continental european and english-speaking countries," Post-Print halshs-00754859, HAL.
    12. Atkinson, A. B. & Piketty, Thomas (ed.), 2007. "Top Incomes Over the Twentieth Century: A Contrast Between Continental European and English-Speaking Countries," OUP Catalogue, Oxford University Press, number 9780199286881.
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    Cited by:

    1. Stephen P. Jenkins, 2017. "Pareto Models, Top Incomes and Recent Trends in UK Income Inequality," Economica, London School of Economics and Political Science, vol. 84(334), pages 261-289, April.
    2. Brian A'Hearn & Nicola Amendola & Giovanni Vecchi, 2016. "On Historical Household Budgets," Rivista di storia economica, Società editrice il Mulino, issue 2, pages 137-176.
    3. repec:spr:soinre:v:135:y:2018:i:1:d:10.1007_s11205-016-1498-8 is not listed on IDEAS
    4. repec:bla:econom:v:84:y:2017:i:334:p:129-156 is not listed on IDEAS
    5. Francesco Olivanti, 2018. "Standard Budgets in Spanish Economic History: a User’s Guide to Sources and Methods," HHB Working Papers Series 10, The Historical Household Budgets Project.
    6. repec:bla:econom:v:84:y:2017:i:334:p:157-179 is not listed on IDEAS
    7. Chris Belfield & Richard Blundell & Jonathan Cribb & Andrew Hood & Robert Joyce, 2017. "Two Decades of Income Inequality in Britain: The Role of Wages, Household Earnings and Redistribution," Economica, London School of Economics and Political Science, vol. 84(334), pages 157-179, April.
    8. Metzing, Maria & Bartels, Charlotte, 2016. "An integrated approach for top-corrected Ginis," Annual Conference 2016 (Augsburg): Demographic Change 145818, Verein für Socialpolitik / German Economic Association.
    9. Brian A'Hearn & Nicola Amendola & Giovanni Vecchi, 2016. "On Historical Household Budgets," Rivista di storia economica, Società editrice il Mulino, issue 2, pages 137-176.
    10. A. B. Atkinson, 2017. "Pareto and the Upper Tail of the Income Distribution in the UK: 1799 to the Present," Economica, London School of Economics and Political Science, vol. 84(334), pages 129-156, April.
    11. Jonathan Cribb & Carl Emmerson, 2017. "Can’t wait to get my pension: ?the effect of raising the female state pension age on income, poverty and deprivation," IFS Working Papers W17/10, Institute for Fiscal Studies.
    12. Richard V. Burkhauser & Markus H. Hahn & Roger Wilkins, 2016. "Top Incomes and Inequality in Australia: Reconciling Recent Estimates from Household Survey and Tax Return Data," Melbourne Institute Working Paper Series wp2016n19, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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    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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