Survey under-coverage of top incomes and estimation of inequality: what is the role of the UKâ€™s SPI adjustment?
Richard Burkhauser (),
Stephen Jenkins () and
No 2017-08, ISER Working Paper Series from Institute for Social and Economic Research
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 UKâ€™s pioneering â€˜SPI adjustmentâ€™ 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 â€˜very richâ€™ individuals are adjusted using information from â€˜very richâ€™ 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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Working Paper: Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UKâ€™s SPI Adjustment? (2017)
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