Recent trends in top income shares

You may recall that some time ago Alan Reynolds (Reynolds responds here) challenged the results of Piketty and Saez on rising income inequality in the United States.  There has now been a systematic look at biases in the data, with the goal being to reconcile data from the Current Population Survey with IRS measurements.  Burkhauser, Feng, Jenkins and Larrimore report their results:

Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967–2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993–2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.

An ungated version is here.  As I read this paper, the Piketty and Saez result, with some modifications for 1993-2000, basically holds up.  It's also worth noting that recent increases in inequality do relate mostly to the top one percent.  That's all for pre-crash times, of course.


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