Abstract
This paper focuses on the sensitivity of survey-based estimates of wealth inequality to the quality of the measurement of the upper tail of the distribution. Using data from the 2013 Survey of Consumer Finances (SCF), it develops a series of illustrative examples to highlight some of the problems in making comparisons of wealth inequality measures when there are specific defects in the measurement of the upper tail of the distribution. The results presented strongly indicate that in the absence of effective controls on the measurement of the upper tail of the wealth distribution, great caution should be the rule in the interpretation of most commonly used measures of wealth inequality from a given survey, comparison of such measures across the waves of the survey, and perhaps even more strongly, comparison across independently designed and managed surveys. A graphical decomposition of the 2013 SCF wealth distribution provides additional insight into the underlying cause of the sensitivity of the inequality measures. The paper concludes with a brief outline of a research program for improving the ability of surveys to provide more meaningful estimates of inequality measures.
Similar content being viewed by others
References
Bach, S., Thiemann, A., and Zucco, A.: The Top Tail of the Wealth Distribution in Germany, France, Spain, and Greece. DIW Discussion Papers, No. 1502 (2015)
Bricker, J., Dettling, L.J., Henriques, A., Hsu, J.W., Moore, K.B., Sabelhaus, J., Thompson, J., Windle, R.A.: Changes in U.S. Family finances from 2010 to 2013: evidence from the survey of consumer finances. Fed. Reserv. Bull. 100, 1–41 (2014)
Bricker, J., Henriques, A. and Hansen. P: How Much Has Wealth Concentration Grown in the United States? A Re-Examination of Data from 2001–2013. Finance and Economics Discussion Series 2018–024. Board of Governors of the Federal Reserve System, Washington (2018)
Chakraborty, R., & Waltl, S. R.: Missing the Wealthy in the HFCS: Micro Problems with Macro Implications. ECB Working Papers, No. 2163 (2018)
Davies, J. B., & Shorrocks, A. F. (2000): The distribution of wealth. In A. Atkinson and F. Bourguignon (eds.) Handbook of Income Distribution, Vol. 1, 605–675. Elsevier (2000)
Eckerstorfer, P., Halak, J., Kapeller, J., Schütz, B., Springholz, F., Windauer, R.: Correction for the missing rich: an approach to wealth survey data. Rev. Income Wealth. 62, 605–627 (2016)
Henriques, A.M., Hsu, J.W.: Analysis of wealth using micro and macro data: a comparison of the survey of consumer finances and flow of funds accounts. In: Jorgenson, D.W., Landefeld, J.S., Schreyer, P. (eds.) Measuring Economic Sustainability and Progress, Studies in Income and Wealth, vol. 72, pp. 245–274. University of Chicago Press, Chicago (2014)
Jenkins, S.P., Van Kerm, P.: The measurement of economic inequality. In: Nolan, B., Salverda, W., Smeeding, T.M. (eds.) The Oxford Handbook of Economic Inequality. Oxford University Press, Oxford (2009)
Kennickell, A.B.: The role of over-sampling of the wealthy in the survey of consumer finances. The IFC's contribution to the 56th ISI session, Lisbon, August 2007, 403–408 (2008)
Kennickell, A.B.: Lining up: survey and administrative data estimates of wealth concentration. Statistical Journal of the International Association for Official Statistics, 33, 59–79 (2017)
Kish, L.: Survey Sampling. John Wiley and Sons, New York (1965)
Pfeffer, F.T., Schoeni, R.F., Kennickell, A.B., Andreski, P.: Measuring wealth and wealth inequality: comparing two US surveys. J. Econ. Soc. Meas. 41, 103–120 (2016)
Saez, E., Zucman, G.: Wealth inequality in the United States since 1913: evidence from capitalized income tax data. Q. J. Econ. 131, 519–578 (2016)
Vermeulen, P.: Estimating the top tail of the wealth distribution. Am. Econ. Rev. Pap. Proc. 106(5), 646–650 (2016)
Vermeulen, P.: How fat is the top tail of the wealth distribution. Rev. Income Wealth, Review of Income and Wea. 64, 357–387 (2018)
Waltl, S. R.: Multidimensional wealth inequality: a hybrid approach toward distributional National Accounts in Europe. LISER Working Paper Series (2019, forthcoming)
Acknowledgements
I am grateful to participants and discussions in the ECB Household Finance and Consumption Network, Janet Gornick, Salvatore Morelli, and participants in the CUNY Stone Center 2017 conference Inequality by the Numbers for stimulating me to write this paper and for participants in the 2018 Paris School of Economics Workshop on Harmonization of Household Surveys, Fiscal Data and National Accounts. I am especially grateful to Laurie Maldonado for help in securing computing resources that made this work possible. I am solely responsible for any errors or omissions.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Kennickell, A.B. The tail that wags: differences in effective right tail coverage and estimates of wealth inequality. J Econ Inequal 17, 443–459 (2019). https://doi.org/10.1007/s10888-019-09424-8
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10888-019-09424-8