Melbourne Institute of Applied Economic and Social Research - Research Publications

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Type: Working Paper × End date: 2020 × Author: Herault, Nicolas × Author: Burkhauser, Richard ×

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    What accounts for the rising share of women in the top 1%?
    Burkhauser, RV ; Herault, N ; JENKINS, S ; Wilkins, R (Melbourne Institute: Applied Economic & Social Research, 2020-06-01)
    The share of women in the top 1% of the UK’s income distribution has been growing over the last two decades (as in several other countries). Our first contribution is to account for this secular change using regressions of the probability of being in the top 1%, fitted separately for men and women, in order to contrast between the sexes the role of changes in characteristics and changes in returns to characteristics. We show that the rise of women in the top 1% is primarily accounted for by their greater increases (relative to men) in the number of years spent in full-time education. Although most top income analysis uses tax return data, we derive our findings taking advantage of the much more extensive information about personal characteristics that is available in survey data. Our use of survey data requires justification given survey under-coverage of top incomes. Providing this justification is our second contribution.
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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 (Melbourne Institute of Applied Economic and Social Research, 2017)
    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.