Melbourne Institute of Applied Economic and Social Research - Research Publications

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Author: Burkhauser, Richard × Author: Herault, Nicolas × End date: 2020 × Type: Journal Article ×

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    Survey under-coverage of top incomes and estimation of inequality: what is the role of the UK’s SPI adjustment?
    Burkhauser, R ; Herault, N ; JENKINS, S ; Wilkins, R (Wiley, 2018-06)
    Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK’s pioneering ‘SPI adjustment’ method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of ‘very rich’ individuals are adjusted using information from ‘very rich’ individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under- coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries.
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    Top incomes and inequality in the UK: reconciling estimates from household survey and tax return data
    Burkhauser, R ; Herault, N ; JENKINS, S ; Wilkins, R (Oxford University Press, 2018-04-01)
    We provide the first systematic comparison of UK inequality estimates derived from tax data (World Wealth and Income Database) and household survey data (the Households Below Average Income [HBAI] subfile of the Family Resources Survey). We document by how much existing survey data underestimate top income shares relative to tax data. Exploiting the flexibility that access to unit-record survey data provides, we then derive new top-income-adjusted data. These data enable us to: better track tax-data-estimated top income shares; change the definitions of income, income-sharing unit, and unit of analysis used and thereby undertake more comparable cross-national comparisons (we provide a UK-US illustration); and examine UK inequality levels and trends using four summary indices. Our estimates reveal a greater rise in the inequality of equivalized gross household income among all persons between the mid-1990s and late 2000s than shown by the corresponding HBAI series, especially between 2004/05 and 2007/08.undertake more comparable cross-national comparisons (we provide a UK-US illustration); and examine UK inequality levels and trends using four summary indices. Our estimates reveal a greater rise in the inequality of equivalized gross household income among all persons between the mid-1990s and late-2000s than shown by the corresponding HBAI series, especially between 2004/05 and 2007/08.