How Closely Do Top Income Shares Track Other Measures of Inequality?

In recent years, researchers have used taxation statistics to estimate the share of total income held by the richest groups, such as the top 10 % or the top 1%. Compiling a standardised top income shares dataset for 13 developed countries, I find that there is a strong and significant relationship between top income shares and broader inequality measures, such as the Gini coefficient. This suggests that panel data on top income shares may be a useful substitute for other measures of inequality over periods when alternative income distribution measures are of low quality, or unavailable. Since Adam Smith, economists have devoted considerable attention to the causes and effects of inequality. 1 Attempting to explain changes in income distribution, economists have considered the impact of unionisation, trade, immigration, inflation, family structure, the age profile of the population, technological change, compulsory schooling, minimum wages and progressive taxation, to name but a few. Inequality has also found itself on the right-hand side of many regressions. Researchers have investigated whether inequality affects growth, consumption, saving, infant mortality, height, residential segregation, happiness, trust, crime and political polarisation. 2 However, much of the empirical research on income distribution has been plagued