Working Paper: NBER ID: w21991
Authors: Richard V. Burkhauser; Nicolas Hrault; Stephen P. Jenkins; Roger Wilkins
Abstract: Estimates of UK income inequality trends differ substantially according to whether estimates are based on household survey data (used for official statistics) or tax return data (used in the top incomes literature). We reconcile differences in variable definitions and combine survey and tax return data in order to take advantage of the much better coverage of top incomes in the latter, and provide improved estimates of UK inequality trends since the mid-1990s. We show there was a marked increase in income inequality in the early 2000s that survey-based estimates do not reveal, and our conclusions are robust to changes in the definitions of income, income-sharing unit, and summary inequality measure. In addition, our reconciled and combined data provide more comparable estimates of UK-US inequality trends than the top incomes literature to date.
Keywords: income inequality; household survey data; tax return data; UK income trends
JEL Codes: C81; D31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Integration of tax return data into household survey data (C81) | Increase in income inequality (D31) |
| Tax return data (H26) | Increase in income inequality (D31) |
| Survey data inadequately captures top incomes (D31) | Underrepresentation of income inequality trends (D31) |
| Increase in the Gini coefficient between fiscal years 2003-04 and 2007-08 using combined data (D31) | Increase in income inequality (D31) |
| Robustness of findings regarding the rise in income inequality (D31) | Confidence in conclusions (C12) |