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Correcting for the Missing Rich: Imputing Missing Incomes into Household Data Proportional to Wealth Distribution

Author

Listed:
  • Halit Güzelsoy

  • Hasan Tekgüç

Abstract

We compare alternative imputation methods to correct for missing incomes of the rich in inequality estimates for countries where official tax statistics are not available or reliable. First, we demonstrate that correcting household survey data by imputing missing incomes proportional to wealth distribution is both (i) economically intuitive and macroeconomically consistent, and (ii) yields results close to benchmark studies for Turkey for 2019. We follow Alvaredo et al. (2019) and use the average of the US, China, and France’s wealth distribution (from WID) for countries where wealth distribution data is missing. Second, we validate our method with summary statistics data for Brazil and Chile from LIS. We compare our estimates for corrected Gini for Brazil and Chile with De Rosa et al. (2024), which employs official tax statistics. Our estimates approximate De Rosa et al. (2024) findings both in magnitude of correction and in trends over time. Third, we estimate corrected Gini coefficients for developing countries where no reliable tax data is available and show that official Gini estimates under-estimate inequality by more than 10 percentage points in most places and times. To conclude, we propose a method to correct inequality estimates for missing incomes of the rich that requires only publicly available summary data from LIS (for income distribution), WID (for wealth distribution), and World Bank WDI for GDP and its expenditure components, and no specialized software.

Suggested Citation

  • Halit Güzelsoy & Hasan Tekgüç, 2025. "Correcting for the Missing Rich: Imputing Missing Incomes into Household Data Proportional to Wealth Distribution," LIS Working papers 903, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:903
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    References listed on IDEAS

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    1. Facundo Alvaredo & Anthony Atkinson & Lucas Chancel & Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2016. "Distributional National Accounts (DINA) Guidelines : Concepts and Methods used in WID.world," Working Papers halshs-02794308, HAL.
    2. repec:tcb:cebare:v:23:y:2023:i:2:p:1-17 is not listed on IDEAS
    3. Roy van der Weide & Christoph Lakner & Elena Ianchovichina, 2018. "Is Inequality Underestimated in Egypt? Evidence from House Prices," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(s1), pages 55-79, October.
    4. Evren Ceritoglu & Seyit Mumin Cilasun & Muserref Kucukbayrak & Ozlem Sevinc, 2023. "Household portfolios in Türkiye: Results from the household finance and consumption survey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 23(4).
    5. Marcelo Medeiros & Juliana Castro Galvão & Luísa Azevedo Nazareno, 2018. "Correcting the Underestimation of Top Incomes: Combining Data from Income Tax Reports and the Brazilian 2010 Census," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 135(1), pages 233-244, January.
    6. Gianni Betti & Evren Ceritoglu & Muserref Kucukbayrak & Ozlem Sevinc, 2022. "Central Bank of the Republic of Turkey Household Finance and Consumption Survey Methodology," Working Papers 2201, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    7. repec:tcb:cebare:v:23:y:2023:i:4:p:1-17 is not listed on IDEAS
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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