Inequality measurements: the impact of a correction for missing top incomes in a South African household survey

Often the richest households are poorly captured in household surveys1, leading to a likely underestimate of inequality in analyses such as CEQ Assessments2 that conduct fiscal incidence using household surveys. The South Africa 2014/15 Living Conditions Survey (LCS) is no different. The top 1 percent of taxpayers earn R223 000 on average, versus an average of R1.9 million in taxable income annually in the administrative data3. A new CEQ Assessment for South Africa4 takes advantage of high-quality administrative data on the income distribution to adjust the 2014/15 LCS survey distribution permitting an examination of the impact on inequality, the progressivity of different instruments, and their contributions to inequality.