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Using the P90/P10 Ratio to Measure Inequality Trends with the Current Population Survey: A View from Inside the Census PowerPoint Presentation
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Using the P90/P10 Ratio to Measure Inequality Trends with the Current Population Survey: A View from Inside the Census Bureau Vaults. Richard V. Burkhauser Cornell University Shuaizhang Feng Shanghai University of Finance and Economics Stephen P. Jenkins University of Essex

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slide1

Using the P90/P10 Ratio to Measure Inequality Trends with the Current Population Survey: A View from Inside the Census Bureau Vaults

Richard V. Burkhauser

Cornell University

Shuaizhang Feng

Shanghai University of Finance and Economics

Stephen P. Jenkins

University of Essex

December 17, 2006

Presented at the 2006 International Symposium on Contemporary Labor Economics

Xiamen, China

past work
Past Work

“Levels and Long-Term Trends in Earnings Inequality: Overcoming Current Population Survey Censoring Problems Using the GB2 Distribution” JBES

Shuaizhang Feng

Richard V. Burkhauser

J.S. Butler

outline of the talk
Outline of the Talk
  • Introduction
  • The Problem
  • Methods
  • Results
  • Comparing Trends of P90/P10 with Gini Coefficients
  • Conclusion
introduction
Introduction
  • The practice of top coding affects earnings/income inequality trends based on public March Current Population Surveys (CPS).
  • Previous researches have been focused primarily on Gini coefficients. (Burkhauser et al., 2004; Feng et al. 2006)
  • No similar scrutiny has been given to the impact of censoring on percentile ratios, such as P90/P10.
slide5
Introduction
  • The Problem
  • Methods
  • Results
  • Comparing Trends of P90/P10 with Gini Coefficients
  • Conclusion
the problem censoring in public and internal cps
The Problem: Censoring in Public and Internal CPS
  • Current Population Survey (CPS) is a large household survey administered by US Census Bureau each month.
  • March Supplements of CPS provide income information of US population about the previous year
  • Most income inequality measures of US are based on CPS, including official releases.
the problem censoring in public and internal cps7
The Problem: Censoring in Public and Internal CPS
  • Public & Internal data files of the Current Population Survey
  • Censoring occurs in both version (in the public files: top coding)
  • Censoring occurs at each individual levels of income, not the total.
  • Censoring (top coding) practices vary with time.
the problem censoring in public and internal cps8
The Problem: Censoring in Public and Internal CPS
  • Our aim is the long term trend of earnings/income inequality.
  • However, trend based on public data is misleading (topcoding).

(Levy & Murnane, 1992; Burkhauser et al. 2004)

  • Even numbers based on Internal files are also contaminated by censoring.
  • For Gini, Burkhauser (2004) proposed consistent topcoding, and Feng et al. (2006) proposed parametric modelling of earnings based on GB2.
the problem censoring in public and internal cps9
The Problem: Censoring in Public and Internal CPS
  • What about P90/P10?
  • People have not been worrying about P90/P10 as total percentage of income values affected by topcoding is typically small (less than 10%).
  • But, remember censoring occurs at each individual sources while we are interested in the trend of the total value.
slide10
Introduction
  • The Problem
  • Methods
  • Results
  • Comparing Trends of P90/P10 with Gini Coefficients
  • Conclusion
methods
Methods
  • We are able to access to internal CPS data of U.S. Census Bureau through the New York Census Research Data Center at Cornell University.
  • We use the P90/P10 ratios calculated from internal data to assess the impacts of public top coding on inequality trends, and as a baseline to evaluate alternative approaches to correct for this problem
  • 7 different P90/P10 series are calculated.
methods12
Methods

Public:Public-use March CPS with cell-means since 1995. [based on public data]

Rule of Thumb:Public with topcodes equal to (1.5)*(top code). [based on public data]

Cell-Mean: Public with topcodes with internally measured cell means. [based on internal data, but could be available to public in principal]

methods13
Methods

Public Lower:Lower limit of P90/P10 based on public files. {assigning the censoring cutoff point for censored values} [based on public data]

Public Upper:Upper Limit based on public files. {assigning positive infinity for censored values} [based on public data]

methods14
Methods

Internal Lower:Lower limit of P90/P10 based on internal files. [based on internal data]

Internal Upper:Upper Limit based on internal files. [based on internal data]

slide15
Introduction
  • The Problem
  • Methods
  • Results
  • Comparing Trends of P90/P10 with Gini Coefficients
  • Conclusion
results
Results

We consider three income concepts:

  • Wages and Salaries of Full time Full year workers
  • Total Labor Earnings of Full time Full year workers
  • Size-adjusted Household Income
slide22
Introduction
  • The Problem
  • Methods
  • Results
  • Comparing Trends of P90/P10 with Gini Coefficients
  • Conclusion
p90 p10 vs gini
P90/P10 vs. Gini
  • Our preferred P90/P10 series: Cell-mean
  • Our preferred Gini series: GB2 with public data
  • This is the first time the two are compared with both corrected for the problem of censoring.
slide27
Introduction
  • The Problem
  • Methods
  • Results
  • Comparing Trends of P90/P10 with Gini Coefficients
  • Conclusion
conclusions
Conclusions
  • Top coding affects calculation of P90/P10 ratios, especially for household income.
  • With consistent cell means, public-use P90/P10 ratios mirror those using internal data.
  • P90/P10 ratios and Gini coefficients have very different long term trends.