Work

The impact of measurement error on trends in earnings inequality in the USA

Year: 2025

Type: article

Abstract: Measurement error is pervasive in self-reported income and has likely evolved over time. As such, the extent of and trends in income inequality are difficult to discern. While administrative data are a possible solution, they face their own measurement issues and are frequently unavailable. Here, we propose a new method based on stochastic frontier analysis to correct self-reported income for measurement error throughout the distribution. We then apply this method to repeated cross-sectional data in the USA spanning 1960–2023 to assess trends in earnings inequality using ‘error-free’ data on earnings.

Source: Empirical Economics

DOI: 10.1007/s00181-025-02783-4

Authors: Daniel L. Millimet, Christopher F. Parmeter

Institutions: Southern Methodist University, University of Miami

Language: English

Topic: Income, Poverty, and Inequality

Subfield: Sociology and Political Science

Field: Social Sciences

Domain: Social Sciences

SDGs: Reduced inequalities, No poverty

Open Access status: hybrid

Estimated APC paid: $3,490