ABSTRACT
A conditional tail index estimator is introduced which explicitly allows for right-tail censoring (top-coding). We show that the factor values used to adjust top-coded wages have changed over time and depend on individuals’ characteristics, occupations and industries, and propose suitable values. Specifically, contrasting the results of our approach with those of a conservative fixed adjustment factor of 1.5 (used in the literature), suggests that wage inequality in 2017 measured with the Gini coefficient is larger than that suggested by the fixed adjustment factor.
WITH
Pedro Raposo, Católica Lisbon School of Business and Economics, Lisboa, Portugal
