Determination of Income Mobility Using Tax Return Data

Abstract

This research addresses the question of whether taxpayers were income mobile during 1979-1990. Following prior research, the authors compare ranks of individuals in the sample distribution of income across years. Extending prior research, the question is asked: Does an individual draw his income from some fixed subset of the distribution of possible incomes, implying a limited income opportunity set, or from the total distribution of incomes, implying an unlimited income opportunity set? Group income distributions within each year are analyzed using stochastic dominance. The authors find limited income mobility over 1979-1990 and that individuals face a limited income opportunity set based on their group membership.