Income Inequality in Switzerland: Extent Underestimated

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Income Inequality in Switzerland: Extent Underestimated

How big is the gap between rich and poor in Switzerland? Official statistics on income inequality provide an answer. A study by the Bern University of Applied Sciences and the University of Bern has now compared the previous survey methods with tax data. This revealed considerable discrepancies.

Determining the extent of income inequality is a difficult undertaking that places high demands on science. Many countries have designed their own surveys for this purpose. By means of regularly conducted sample surveys, experts can examine the development of income distribution. In Switzerland, the Household Budget Survey (HABE) is often used for this purpose.

Low and very high incomes are underrepresented

Researchers from the BFH Center for Social Security and the Institutes of Sociology at the University of Bern used tax data as part of the research project Inequality in Switzerland to investigate how reliably social distribution indicators can be calculated using sample surveys.

For this purpose, they compared the distribution of primary income (income before social transfers and taxes) resulting from the HABE with a distribution based on tax data. To make the results comparable, they harmonized household and income definitions. Because tax data include all taxpayers, it can be assumed that they represent the entire population more accurately.

The comparison of the data shows that low and very high incomes are underrepresented in the sample-based HABE. This particularly affects the richest and the poorest 5 percent. If inequality is quantified using the Gini coefficient, inequality in primary income (before social transfers and taxes) is around 10 percent higher in the tax data.

The study raises the question of whether the extent of inequality is not also underestimated in other countries when survey data are used for this purpose. After all, the recent trend in inequality is driven precisely by those high earners who are systematically underrepresented in surveys.

Publication details:

Oliver Hümbelin, Rudolf Farys: The suitability of tax data to study trends in inequality-A theoretical and empirical review with tax data from Switzerland, Research in Social Stratification and Mobility, Volume 44, June 2016, pp. 136-150, doi: http://dx.doi.org/10.1016/j.rssm.2016.04.004


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