Journal article

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

R Burkhauser, N Herault, S JENKINS, R Wilkins

Fiscal Studies | Wiley | Published : 2018

Abstract

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..

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Grants

Awarded by Australian Research Council


Awarded by UK Economic and Social Research Council


Funding Acknowledgements

This research is supported by an Australian Research Council Discovery Grant (award DP150102409). Jenkins's research is also partially supported by core funding of the Research Centre on Micro-Social Change at the Institute for Social and Economic Research (ISER) by the University of Essex and the UK Economic and Social Research Council (award ES/L009153/1). For helpful discussions about the HBAI data and SPI adjustments, the authors thank Peter Matejic and his DWP colleagues and Jeremy Reuben from HMRC's SPI team. They also gratefully acknowledge the perceptive comments of the three anonymous referees.