Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287841 
Year of Publication: 
2021
Citation: 
[Journal:] Review of Income and Wealth [ISSN:] 1475-4991 [Volume:] 69 [Issue:] 1 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2021 [Pages:] 100-123
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
Underreporting and undersampling biases in top tail wealth, although widely acknowledged, have not been statistically quantified so far, essentially because they are not readily observable. Here we exploit the functional form of power law‐like regimes in top tail wealth to derive analytical expressions for these biases, and use German microdata from a popular survey and rich list to illustrate that tiny differences in non‐response rates lead to tail wealth estimates that differ by an order of magnitude, in our case ranging from 1 to 9 trillion euros. Underreporting seriously compounds the problem, and we find that the estimation of totals in scale‐free systems oftentimes tends to be spurious. Our findings also suggest that recent debates on the existence of scale‐ or type‐dependence in returns to wealth are ill‐posed because the available data cannot discriminate between scale‐ or type‐dependence, on one hand, and statistical biases, on the other hand. Yet both economic theory and mathematical formalism indicate that sampling and reporting biases are more plausible explanations for the observed data than scale‐ or type‐dependence.
Subjects: 
wealth inequality
stochastic growth
differential non‐response
Hill estimator
tail index bias
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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