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Dealing with Censored Earnings in Register Data

Author

Listed:
  • Mattis Beckmannshagen

    (DIW Berlin - Deutsches Institut für Wirtschaftsforschung)

  • Johannes König

    (DIW Berlin - Deutsche Institut für Wirtschaftsforschung = German Institute for Economic Research)

  • Isabella Retter

    (DIW Berlin - Deutsche Institut für Wirtschaftsforschung = German Institute for Economic Research)

  • Christian Schluter

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, University of Southampton)

  • Carsten Schröder

    (DIW Berlin - Deutsches Institut für Wirtschaftsforschung)

  • Yogam Tchokni

    (DIW Berlin - Deutsche Institut für Wirtschaftsforschung = German Institute for Economic Research)

Abstract

Earnings are often top-coded (right-censored) in administrative registers. The censoring threshold in the case of Germany is the limit value for social security contributions, leading to a substantial fraction of censoring: For example, about 12 % of male workers in West Germany are affected, rising to above 30 % for highly educated prime-aged workers. This missing right tail of the earnings distribution constitutes a major problem for researchers studying earnings inequality and top incomes. We overcome this challenge by taking a distributional approach and semi-parametrically modelling the right tail as being Pareto-like. Non-censored earnings survey data matched to administrative records, derived from the SOEP-RV project, let us operate in a laboratory-like setting in which the targets are known. Our approach outperforms alternative imputation methods based on Tobit regressions.

Suggested Citation

  • Mattis Beckmannshagen & Johannes König & Isabella Retter & Christian Schluter & Carsten Schröder & Yogam Tchokni, 2025. "Dealing with Censored Earnings in Register Data," Post-Print hal-05084494, HAL.
    • Handle: RePEc:hal:journl:hal-05084494
    DOI: 10.1515/jbnst-2024-0037
    Note: View the original document on HAL open archive server: https://hal.science/hal-05084494v1
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