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Journal Article

Survey under-coverage of top incomes and estimation of inequality: what is the role of the UK’s SPI adjustment?

Authors

Publication date

Jun 2018

Summary

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.

Published in

Fiscal Studies

Volume and page numbers

39 , 213 -240

DOI

https://doi.org/10.1111/1475-5890.12158

ISSN

16

Subjects

Statistical Analysis, Income Dynamics, Taxation, and Surveys

Notes

Open Access; This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.; © 2017 The Authors. Fiscal Studies published by John Wiley & Sons Ltd. on behalf of Institute for Fiscal Studies


Related publications

  1. Survey under-coverage of top incomes and estimation of inequality: what is the role of the UK’s SPI adjustment?

    Richard V. Burkhauser, Nicolas Hérault, Stephen P. Jenkins, et al.

    1. Statistical Analysis
    2. Income Dynamics
    3. Taxation
    4. Surveys

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