On Data: A Case Study of the Evolution of Income Inequality Across Time and Across Countries

Abstract

This paper takes income distribution as a case study of the role of data in economics. After describing the transformation which has taken place with regard to the availability of data on income inequality, it discusses how the comparability of these estimates is brought into question by differences in methodology that cannot be eliminated by simple adjustments. Recent analyses of the relationships between income inequality and growth or globalisation are shown to be based on time series plagued by discontinuities which can seriously affect regression results. The paper concludes by calling for greater attention to data quality in applied economics.

Keywords: Data quality, Measurement bias, Income distribution, Growth, Globalisation

JEL Classification: D31, C8