Dealing with Censored Earnings in Register Data

Mattis Beckmannshagen, Johannes König, Isabella Retter (), Christian Schluter (), Carsten Schröder and Yogam Tchokni ()
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Mattis Beckmannshagen: DIW Berlin - Deutsches Institut für Wirtschaftsforschung
Johannes König: DIW Berlin - Deutsche Institut für Wirtschaftsforschung = German Institute for Economic Research
Isabella Retter: DIW Berlin - Deutsche Institut für Wirtschaftsforschung = German Institute for Economic Research
Christian Schluter: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, University of Southampton
Yogam Tchokni: DIW Berlin - Deutsche Institut für Wirtschaftsforschung = German Institute for Economic Research

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Abstract: Earnings are often top-coded (right-censored) in administrative registers. The censoring threshold in the case of Germany is the limit value for social security contributions, leading to a substantial fraction of censoring: For example, about 12 % of male workers in West Germany are affected, rising to above 30 % for highly educated prime-aged workers. This missing right tail of the earnings distribution constitutes a major problem for researchers studying earnings inequality and top incomes. We overcome this challenge by taking a distributional approach and semi-parametrically modelling the right tail as being Pareto-like. Non-censored earnings survey data matched to administrative records, derived from the SOEP-RV project, let us operate in a laboratory-like setting in which the targets are known. Our approach outperforms alternative imputation methods based on Tobit regressions.

Keywords: right-censored earnings; top-coding; SOEP-RV; heavy-tailed distribution; extreme value index; imputation (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-eur
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Published in Journal of Economics and Statistics, inPress, ⟨10.1515/jbnst-2024-0037⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05084494

DOI: 10.1515/jbnst-2024-0037

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