Correcting for the Missing Rich: An Application to Wealth Survey Data

Abstract

It is a well-known criticism that if the distribution of wealth is highly concentrated, survey data are hardly reliable when it comes to analyzing the richest parts of society. This paper addresses this criticism by providing a general rationale of the underlying methodological problem as well as by proposing a specific methodological approach tailored to correcting the arising bias. We illustrate the latter approach by using Austrian data from the Household Finance and Consumption Survey. Specifically, we identify suitable parameter combinations by using a series of maximum-likelihood estimates and appropriate goodness-of-fit tests to avoid arbitrariness with respect to the fitting of the Pareto distribution. Our results suggest that the alleged non-observation bias is considerable, accounting for about one quarter of total net wealth in the case of Austria. The method developed in this paper can easily be applied to other countries where survey data on wealth are available. JEL Codes: C46, C81, D31

How Much has Wealth Concentration Grown in the United States? A Re-Examination of Data from 2001-2013

“…44 In appendix B, we can estimate coverage error by assuming that the missing Forbes 400 wealth follows a Pareto distribution. Pareto distribution has been used in other studies to augment European household survey data (Vermeulen, 2015, Dalitz, 2016, Eckerstorfer et al, 2016. 45 We do so in a similar way to how the AP and list sample weights are are woven together to create final weights for the SCF (Kennickell and Woodburn, 1999).…”

“…Federal Reserve Board (FRB) and with the cooperation of the Department of Treasury (SOI) 12. The SCF provides the most comprehensive and highest quality survey microdata available on U.S. household wealth.…”

The Top Tail of the Wealth Distribution in Germany, France, Spain, and Greece

“…We also use this cut-off point for Greece, although there is no clear stable trend of w m/ /w. 4 Eckerstorfer et al (2015) propose an advanced method to obtain the cut-off point above which wealth follows a Pareto distribution. They suggest identifying suitable parameter combinations of maximum-likelihood estimates and goodness-of-fit tests.…”

Looking for the Missing Rich: Tracing the Top Tail of the Wealth Distribution

“…For larger countries there are national wealth rankings covering households or families with large fortunes. Researchers use such lists to check top wealth estimates based on survey data or to augment survey data (see e.g., Davies (1993) for Canada, Bach et al (2014) for Germany, and Eckerstorfer et al (2016) for Austria).…”