NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Using the Pareto Distribution to Improve Estimates of Topcoded Earnings

Philip Armour, Richard V. Burkhauser, Jeff Larrimore

NBER Working Paper No. 19846
Issued in January 2014
NBER Program(s):   LS   PE   TWP

Inconsistent censoring of top earnings in the public-use March Current Population Survey (CPS) is an important limitation in using it to measure labor earnings trends. Using less-censored internal CPS data, combined with Pareto estimates from it for internally censored observations, we create an enhanced cell-mean series to capture top earnings in the public-use CPS. We find previous common approaches for imputing topcoded earnings systematically understate top earnings. Annual earnings inequality trends since 1963 using our series closely approximate the substantial increase in earnings inequality observed in Social Security Administration data for working-age commerce and industry workers by Kopczuk, Saez, and Song (2010). However, when considering all workers the level of earnings inequality is higher but the increase over this time has been more modest.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19846

Users who downloaded this paper also downloaded these:
Armour, Burkhauser, and Larrimore w19110 Levels and Trends in United States Income and Its Distribution A Crosswalk from Market Income Towards a Comprehensive Haig-Simons Income Approach
Barreca, Clay, and Tarr w19881 Coal, Smoke, and Death: Bituminous Coal and American Home Heating
Greenwood, Guner, Kocharkov, and Santos w19829 Marry Your Like: Assortative Mating and Income Inequality
Adelino, Ma, and Robinson w19845 Firm Age, Investment Opportunities, and Job Creation
Larrimore, Burkhauser, and Armour w19699 Accounting for Income Changes over the Great Recession (2007-2010) Relative to Previous Recessions: The Importance of Taxes and Transfers
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us