IDEAS home Printed from https://ideas.repec.org/p/inq/inqwps/ecineq2021-583.html
   My bibliography  Save this paper

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

Author

Listed:
  • Rafael Carranza

    (University of Oxford)

  • Marc Morgan

    (Paris School of Economics and World Inequality Lab)

  • Brian Nolan

    (University of Oxford)

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

  • Rafael Carranza & Marc Morgan & Brian Nolan, 2021. "Top Income Adjustments and Inequality: An Investigation of the EU-SILC," Working Papers 583, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2021-583
    as

    Download full text from publisher

    File URL: http://www.ecineq.org/milano/WP/ECINEQ2021-583.pdf
    File Function: First version, 2021
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas Piketty & Li Yang & Gabriel Zucman, 2019. "Capital Accumulation, Private Property, and Rising Inequality in China, 1978–2015," American Economic Review, American Economic Association, vol. 109(7), pages 2469-2496, July.
    2. Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, February.
    3. Ercio Muñoz & Salvatore Morelli, 2021. "kmr: A command to correct survey weights for unit nonresponse using groups’ response rates," Stata Journal, StataCorp LP, vol. 21(1), pages 206-219, March.
    4. 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.
    5. Facundo Alvaredo & Lucas Chancel & Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2017. "Global Inequality Dynamics: New Findings from WID.world," American Economic Review, American Economic Association, vol. 107(5), pages 404-409, May.
    6. 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.
    7. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
    8. Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2018. "Distributional National Accounts: Methods and Estimates for the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 133(2), pages 553-609.
    9. Thomas Blanchet & Lucas Chancel & Amory Gethin, 2020. "Why Is Europe More Equal Than the United States?," World Inequality Lab Working Papers halshs-03022133, HAL.
    10. Vladimir Hlasny, 2021. "Parametric representation of the top of income distributions: Options, historical evidence, and model selection," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1217-1256, September.
    11. 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.
    12. Vladimir Hlasny, 2020. "Nonresponse Bias in Inequality Measurement: Cross‐Country Analysis Using Luxembourg Income Study Surveys," Social Science Quarterly, Southwestern Social Science Association, vol. 101(2), pages 712-731, March.
    13. Anthony Atkinson & Thomas Piketty, 2010. "Top Incomes : A Global Perspective," PSE-Ecole d'économie de Paris (Postprint) halshs-00754875, HAL.
    14. Feldstein, Martin S, 1969. "The Effects on Taxation on Risk Taking," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 755-764, Sept./Oct.
    15. Thomas Piketty & Li Yang & Gabriel Zucman, 2019. "Capital Accumulation, Private Property, and Rising Inequality in China, 1978–2015," American Economic Review, American Economic Association, vol. 109(7), pages 2469-2496, July.
    16. Vladimir Hlasny & Paolo Verme, 2018. "Top Incomes and Inequality Measurement: A Comparative Analysis of Correction Methods Using the EU SILC Data," Econometrics, MDPI, Open Access Journal, vol. 6(2), pages 1-21, June.
    17. Thomas Blanchet & Ignacio Flores & Marc Morgan, 2018. "The Weight of the Rich: Improving Surveys Using Tax Data," World Inequality Lab Working Papers hal-02878315, HAL.
    18. 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.
    19. Charlotte Bartels & Maria Metzing, 2019. "An integrated approach for a top-corrected income distribution," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 125-143, June.
    20. Atkinson, A. B. & Piketty, Thomas (ed.), 2010. "Top Incomes: A Global Perspective," OUP Catalogue, Oxford University Press, number 9780199286898.
    21. Korinek, Anton & Mistiaen, Johan A. & Ravallion, Martin, 2007. "An econometric method of correcting for unit nonresponse bias in surveys," Journal of Econometrics, Elsevier, vol. 136(1), pages 213-235, January.
    22. 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.
    23. Anton Korinek & Johan Mistiaen & Martin Ravallion, 2006. "Survey nonresponse and the distribution of income," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(1), pages 33-55, April.
    24. Thomas Piketty, 2003. "Income Inequality in France, 1901-1998," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1004-1042, October.
    25. 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.
    26. Callan, Tim & Doorley, Karina & McTague, Alyvia, 2020. "Top Incomes in Ireland: Reconciling Evidence from Tax Records and Household Survey Data," IZA Discussion Papers 13585, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rafael Carranza & Marc Morgan & Brian Nolan, 2021. "Top Income Adjustments and Inequality: An Investigation of the EU-SILC," Working Papers halshs-03321885, HAL.
    2. Rafael Carranza & Marc Morgan & Brian Nolan, 2021. "Top Income Adjustments and Inequality: An Investigation of the EU-SILC," World Inequality Lab Working Papers halshs-03321885, HAL.
    3. 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.
    4. Nora Lustig, 2019. "The “Missing Rich” in Household Surveys: Causes and Correction Approaches," Commitment to Equity (CEQ) Working Paper Series 75, Tulane University, Department of Economics.
    5. , Stone Center & Lustig, Nora, 2020. "The “Missing Rich” in Household Surveys: Causes and Correction Approaches," SocArXiv j23pn, Center for Open Science.
    6. Nora Lustig, 2020. "The ``missing rich'' in household surveys: causes and correction approaches," Working Papers 520, ECINEQ, Society for the Study of Economic Inequality.
    7. Winkelried, Diego & Escobar, Bruno, 2020. "Declining inequality in Latin America? Robustness checks for Peru," MPRA Paper 106566, University Library of Munich, Germany.
    8. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," World Inequality Lab Working Papers hal-02876995, HAL.
    9. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102834, London School of Economics and Political Science, LSE Library.
    10. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102814, London School of Economics and Political Science, LSE Library.
    11. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," Working Papers hal-02876995, HAL.
    12. Thomas Blanchet & Ignacio Flores & Marc Morgan, 2018. "The Weight of the Rich: Improving Surveys Using Tax Data," Working Papers hal-02878315, HAL.
    13. Branko Milanovic, 2014. "The Return of "Patrimonial Capitalism": A Review of Thomas Piketty's Capital in the Twenty-First Century," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 519-534, June.
    14. Nora Lustig, 2018. "Measuring the Distribution of Household Income, Consumption and Wealth: State of Play and Measurement Challenges," Working Papers 1801, Tulane University, Department of Economics.
    15. Rodríguez Weber, Javier, 2015. "Estimación de desigualdad de ingreso y otras variables relacionadas para Chile entre 1860 y 1970. Metodología y resultados obtenidos [Income inequality estimates for Chile between 1860 and 1970. Me," MPRA Paper 68400, University Library of Munich, Germany.
    16. Facundo Alveredo & Juliana Londoño Vélez, 2013. "High incomes and personal taxation in a developing economy: Colombia 1993-2010," Commitment to Equity (CEQ) Working Paper Series 12, Tulane University, Department of Economics.
    17. Boschini, Anne & Gunnarsson, Kristin & Roine, Jesper, 2017. "Women in Top Incomes – Evidence from Sweden 1974-2013," Working Paper Series 5/2017, Stockholm University, Swedish Institute for Social Research.
    18. Facundo Alveredo & Juliana Londoño Vélez, 2013. "High incomes and personal taxation in a developing economy: Colombia 1993-2010," Commitment to Equity (CEQ) Working Paper Series 1312, Tulane University, Department of Economics.
    19. Facundo Alvaredo & Lydia Assouad & Thomas Piketty, 2019. "Measuring lnequality in the Middle East 1990–2016: The World’s Most Unequal Region?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(4), pages 685-711, December.
    20. Jordá, Vanesa & Niño-Zarazúa, Miguel, 2019. "Global inequality: How large is the effect of top incomes?," World Development, Elsevier, vol. 123(C), pages 1-1.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inq:inqwps:ecineq2021-583. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/ecineea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Maria Ana Lugo (email available below). General contact details of provider: https://edirc.repec.org/data/ecineea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.