Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring

Burkhauser, Richard V.; Feng, Shuaizhang; Jenkins, Stephen P.; Larrimore, Jeff

doi:10.2139/ssrn.1267831

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Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring

IZA Discussion Paper No. 3690

41 Pages Posted: 14 Sep 2008

See all articles by Richard V. Burkhauser

Richard V. Burkhauser

Cornell University - Department of Policy Analysis & Management (PAM); University of Melbourne, Melbourne Institute

Shuaizhang Feng

Shanghai University of Finance and Economics - Department of Economics; Princeton University; IZA Institute of Labor Economics

London School of Economics & Political Science (LSE) - Department of Social Policy and Administration; Institute for the Study of Labor (IZA); University of Essex - Institute for Social and Economic Research (ISER)

Jeff Larrimore

Board of Governors of the Federal Reserve System

There are 2 versions of this paper

Date Written: September 2008

Abstract

Using internal and public use March Current Population Survey data, we analyze trends in US income inequality (1975-2004). Using a multiple imputation approach where values for censored observations are imputed using draws from a Generalized Beta distribution of the Second Kind, we find that the upward trend in income inequality significantly slowed after 1993. Our results closely match the income share trends reported by Piketty and Saez (2003) except for within the top 1 percent of the distribution. Thus, we argue that if inequality has increased substantially since 1993, such increases are confined to this very high income group.

Keywords: US income inequality, time trend, CPS, censoring, topcoding, inequality

JEL Classification: D31, C81

Suggested Citation: Suggested Citation

Burkhauser, Richard V. and Feng, Shuaizhang and Jenkins, Stephen P. and Larrimore, Jeff, Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring (September 2008). IZA Discussion Paper No. 3690, Available at SSRN: https://ssrn.com/abstract=1267831 or http://dx.doi.org/10.2139/ssrn.1267831