Rebuking Piketty
In this paper Auten and Splinter argue that Piketty and Saez’s (2003) top income share estimates are biased as they are based only on individual tax returns and do not account for the effects of major tax reforms, income sources not reported on individual income tax returns, or changes in marriage rates. Auten and Splinter address these issues by broadening income beyond that reported on tax returns. Their results suggest that top income shares are lower than other tax-based estimates, and since the early 1960s, increasing government transfers and tax progressivity resulted in little change in after-tax top income shares.
Income Inequality in the United States: Using Tax Data to Measure Long-term Trends
Authors: Gerald Auten, David Splinter
From: Office of Tax Analysis, U.S. Treasury Department, Joint Committee on Taxation, U.S. Congress
The shortcomings of the Gini index
When comparing countries that are closely related in terms of development, the standard Ginis do not take into account:
- Public spending on health, housing, education, culture, which when high leads to a more egalitarian economy;
- Housing: high rents due to a constrained housing supply will increase inequality (tenants are poorer on average today). But it is difficult to take into account this effect in comparisons or trends, because the price of housing may reflect an improvement in quality or better amenities;
- Hours of work and household production also complicates the equation: a difference in income can be linked to a difference in working hours, especially if one of the spouses in a couple (most often the woman) is inactive or works part-time. However, the inactive spouse can engage in household production (including childcare) that is not taken into account in statistics.
Are our inequality indicators biased?
By: Guillaume Allègre – OFCE
