Advertisement

The Journal of Economic Inequality

, Volume 17, Issue 4, pp 443–459 | Cite as

The tail that wags: differences in effective right tail coverage and estimates of wealth inequality

  • Arthur B. KennickellEmail author
Article

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.

Keywords

Wealth distribution Survey response Estimation bias 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Notes

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.

References

  1. 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)Google Scholar
  2. 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)Google Scholar
  3. 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)Google Scholar
  4. Chakraborty, R., & Waltl, S. R.: Missing the Wealthy in the HFCS: Micro Problems with Macro Implications. ECB Working Papers, No. 2163 (2018)Google Scholar
  5. 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)Google Scholar
  6. 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)CrossRefGoogle Scholar
  7. 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)CrossRefGoogle Scholar
  8. 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)Google Scholar
  9. 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)Google Scholar
  10. 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)CrossRefGoogle Scholar
  11. Kish, L.: Survey Sampling. John Wiley and Sons, New York (1965)Google Scholar
  12. 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)CrossRefGoogle Scholar
  13. 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)CrossRefGoogle Scholar
  14. Vermeulen, P.: Estimating the top tail of the wealth distribution. Am. Econ. Rev. Pap. Proc. 106(5), 646–650 (2016)CrossRefGoogle Scholar
  15. Vermeulen, P.: How fat is the top tail of the wealth distribution. Rev. Income Wealth, Review of Income and Wea. 64, 357–387 (2018)CrossRefGoogle Scholar
  16. Waltl, S. R.: Multidimensional wealth inequality: a hybrid approach toward distributional National Accounts in Europe. LISER Working Paper Series (2019, forthcoming)Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Stone Center, City University of New YorkNew YorkUSA

Personalised recommendations