Abstract
This paper studies the sensitivity of long-run trends in top income shares to differences in top-share measures. While the standard measure fixes a share of the population, we define alternatives that allow variation in both incomes and size of the top group based on defining absolute income thresholds. In an application to United States data, we find that top income share trends over the past century vary somewhat depending on the measure used. Allowing top groups to increase in size after 1980 along with overall economic growth results in a larger increase of top income shares. The historical drops before WWII are sensitive to the choice of income deflator: using GDP inflates interwar top income shares but using CPI deflates them. Altogether, these results recommend using complementary approaches to defining top income groups when measuring long-term top income share trends.
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Acknowledgements
We would like to thank Frank Cowell and Nora Lustig (the editors), two anonymous referees, as well as Gerald Auten, Philipp Doerrenberg, Mathias Dolls, Paul Hufe, Eckhard Janeba, Stephen Jenkins, Larry Katz, Wojciech Kopczuk, Francois Maniquet, Thomas Piketty, Niklas Potrafke, Debraj Ray, Emmanuel Saez, Sebastian Siegloch, David Splinter, Daniel Weishaar, Gabriel Zucman, as well as discussants and participants at various seminars and conferences for their helpful comments and suggestions.
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Krolage, C., Peichl, A. & Waldenström, D. Long-run trends in top income shares: The role of income and population growth. J Econ Inequal 20, 97–118 (2022). https://doi.org/10.1007/s10888-021-09520-8
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DOI: https://doi.org/10.1007/s10888-021-09520-8