September 2008

IZA DP No. 3690: Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring

revised version published in: Journal of Economic Inequality, 2011, 9 (3), 393 - 415

Using internal and public use March Current Population Survey data, we analyze trends in US income inequality (1975–2004). Using a multiple imputation approach where values for censored observations are imputed using draws from a Generalized Beta distribution of the Second Kind, we find that the upward trend in income inequality significantly slowed after 1993. Our results closely match the income share trends reported by Piketty and Saez (2003) except for within the top 1 percent of the distribution. Thus, we argue that if inequality has increased substantially since 1993, such increases are confined to this very high income group.