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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, Richard V., Hérault, Nicolas, Jenkins, Stephen P. and Wilkins, Roger (2017) Survey under-coverage of top incomes and estimation of inequality: what is the role of the UK’s SPI adjustment? Fiscal Studies, 39 (2). pp. 213-240. ISSN 0143-5671

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Identification Number: 10.1111/1475-5890.12158

Abstract

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.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information: © 2017 The Authors © CC BY 4.0
Divisions: Social Policy
Subjects: H Social Sciences > HG Finance
Sets: Departments > Social Policy
Date Deposited: 18 Aug 2017 07:40
Last Modified: 20 Jun 2020 02:31
Projects: ES/L009153/1
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/84038

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