Top-income data and income inequality correction in China

Abstract

This paper estimates the level of income inequality of Chinese residents by combining data from the 2013 Chinese Household Income Project (CHIP 2013) and the Top Incomes in China in 2013 (TIC 2013). Specifically, we apply a Pareto model and a parametric bootstrap method to correct for missing top incomes in the CHIP 2013. After connecting the two datasets, we find that the level of income inequality measured by the Gini coefficient and top income share increases significantly compared with the CHIP2013 data. These conclusions are supported by robustness checks based on other household survey (HS) data and techniques (the expansion method and the direct splicing method). Our results not only facilitate understanding of China’s true level of income inequality, but also provide evidence for income-related policies. It is essential, therefore, that we collect top-income data in China and connect it with the HS data.