USING THE PARETO DISTRIBUTION TO IMPROVE ESTIMATES OF TOPCODED EARNINGS
April 2014
Working Paper Number:
CES-14-21
Abstract
Inconsistent censoring in the public-use March Current Population Survey (CPS) limits its usefulness in measuring labor earnings trends. Using Pareto estimation methods with less-censored internal CPS data, we create an enhanced cell-mean series to capture top earnings in the public-use CPS. We find that previous approaches for imputing topcoded earnings systematically understate top earnings. Annual earnings inequality trends since 1963 using our series closely approximate those found by Kopczuk, Saez, & Song (2010) using Social Security Administration data for commerce and industry workers. However, when we consider all workers, earnings inequality levels are higher but earnings growth is more modest
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estimating,
estimation,
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estimator,
earnings,
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National Science Foundation,
Social Security Administration,
Current Population Survey,
Chicago Census Research Data Center,
Cornell University,
Social Security,
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