Abstract
The increased availability of cohort data and use of dynamic microsimulation models means that more attention is now being paid to longer term income concepts. Results are usually reported for only one income concept and a limited number of summary measures, and it is not clear whether results are influenced by the income concept used. This paper uses simulation methods to compare different approaches. For this purpose a very simple lifecycle earnings model was used to generate profiles of pre‐tax incomes. Many comparisons were made using a flexible tax structure and four alternative income concepts. It was found that there was a substantial amount of agreement among the alternative concepts in making pairwise comparisons, with tentative support for the use of present values.
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