Unit Nonresponse Bias in Inequality Measurement: Worldwide Analysis Using Luxembourg Income Study Database

Social Science Quarterly, 2020, Forthcoming

58 Pages Posted: 21 Mar 2016 Last revised: 22 Dec 2019

See all articles by Vladimir Hlasny

Vladimir Hlasny

Ewha Womans University; United Nations Economic and Social Commission for Western Asia (UN-ESCWA)

Date Written: July 12, 2017

Abstract

This study evaluates the magnitude of biases in the measurement of income inequality due to the tendency of households at the top ends of national income distributions not to complete surveys. This unit nonresponse bias is evaluated and corrected for through a recently proposed probabilistic model utilizing information on regional nonresponse rates and income distributions. To this end, regional nonresponse rates were collected from individual national statistical agencies and are reported in this study. The study also uses 76 microdatasets from 38 high and middle-income countries across the world harmonized and made available by Luxembourg Income Study. The large number of surveys is used to infer consequences of unit nonresponse for the measurement of inequality in the industrialized and middle-income world and in major world regions. Analysis performed on survey data disaggregated geographically into regions for which nonresponse rates are available yields sizeable, systematic corrections for nonresponse. Nonresponse bias is estimated to affect national Gini coefficients typically by 1–8 percentage points, but sometimes by 15 percentage points or more, in line with previous estimates. Other inequality measures such as top income shares are affected more severely. Winsorizing performed by Luxembourg Income Study in producing key figures affects negatively not only Gini estimates but also the estimated corrections for nonresponse. This suggests that specific measurement issues such as the nonresponse bias evaluated here are unlikely to be identified and corrected fully in winsorized income distributions. The degree of geographic disaggregation appears to affects the nonresponse correction negatively, corroborating existing evidence. This phenomenon has not been explained satisfactorily so far and calls for further inquiry.

38 surveys, encompassing 891,271 household records in 422 regions, are used to derive back-of-the-envelope estimates of the Ginis for blocs of countries and worldwide. Gini coefficient for North America – of 44.72 after correction of unit nonresponse – appears quite robust to nonresponse, being merely 0.34 percentage points above the uncorrected statistic. Ginis for Europe and Latin America (excluding low income countries), however, are quite sensitive to the correction, rising from 32.11 to 37.63 (5.52 pc.pt.) in the European Single Market, from 35.25 to 42.97 (7.71 pc.pt.) in Europe including former Soviet-Union and Balkan nations, and from 49.12 to 61.36 (12.24 pc.pt.) in Latin America. Similarly, the Gini for the 35 OECD countries rises from 38.65 to 44.58, for a correction of 5.93 percentage points. Correction for unit nonresponse also matters for the estimation of the worldwide Gini. The corrected estimates, 57.35–57.77, are 3.11–4.14 percentage points above the uncorrected values, 53.64–54.24. Overall, these numbers from across countries, world regions and worldwide appear quite consistent with each other and suggest that unit nonresponse biases Gini coefficients downward by 1–8 percentage points.

Keywords: Top incomes, world Gini, inequality measurement, survey unit nonresponse, Luxembourg Income Study

JEL Classification: D31, D63, N35

Suggested Citation

Hlasny, Vladimir, Unit Nonresponse Bias in Inequality Measurement: Worldwide Analysis Using Luxembourg Income Study Database (July 12, 2017). Social Science Quarterly, 2020, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2752319 or http://dx.doi.org/10.2139/ssrn.2752319

Vladimir Hlasny (Contact Author)

Ewha Womans University ( email )

11-1 Daehyun-dong
Seodaemun-gu
Seoul 120-750
Korea, Republic of (South Korea)

United Nations Economic and Social Commission for Western Asia (UN-ESCWA) ( email )

P.O. Box 11-8575
Riad el-Solh Square
Beirut, Lebanon 10000
Lebanon

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