Negative incomes

Negative incomes in SILC Change in average Equivalised disposable income (HY020), if all negative incomes is set to 0. Source: SILC 2013 UDB

What causes negative incomes Capital losses (I.e. on stocks etc., when they are sold and the loss is realized) Interest rate expenses Losses for self-employed Taxes, reimbursements etc. Why so large negative incomes in Danish income statistics? All mentioned types of negative income is too be reported to the tax department in the year they occur They are fully included in the statistics for the year they occur

Primary cause of negative incomes 14.623 people live in families with negative incomes in 2013 in Denmark. Source: Full population income register

Primary cause of negative incomes – Weighted by amount. 2013 Total negative EQ. Disp. Income for the 14.623 members of families was 413.3 million Euros or 37.948 Euros pr. person with negative income.

Then came the financial crisis… OMXC – Danish stock index (1995=100) Source: www.statbank.dk/MPK13 - 30/08-2015

Time for testing! How do introducing a cap on negative incomes change the story on danish inequality throughout the financial crisis? Four gini series calculated on EQ. DISP. income. With application of different caps on negative income. No cap A cap at -1 mio. Euros A cap at -100 000 Euros A cap at 0 Euros

The Gini-Coeffincient with caps on negative incomes Source: Full population income register (National income def)

SILC – 2010 databreak Income callibration regime prior to 2010: Split population and sample into income intervals. Make sure there’s the same amount of people in each interval after callibration is done Income callibration regime after to 2010: Make sure there’s the same amount of people and same incomemass in each interval after callibration is done

Result of 2010 – calibration change  Full coherence between the full population register and SILC when it comes to inequality and averages (If using the same income definition)  But... Comparability! Source: SILC 2013 UDB

Danish 2014-revision In the 2014 SILC-revision a cap on negative income, at -100 000 Euros has been introduced into the calibration of SILC. Change in average Equivalised disposable income (HY020), if all negative incomes is set to 0. Source: SILC 2013 UDB

The updated story on Danish inequality Source: Full population income register (National income definition)

My recommendations Introduction of some top/bottom-coding in the calculation of inequality indicators. (OECD practice is to set all negative incomes to zero. This might be to drastic) NSIs should still be able to report negative incomes in full. (For the benefit of researchers and not to interfere with calculation of income averages) Practices on top/bottom-coding should be described in all the national quality-reports.

You wish to know more? Contact: Jarl Quitzau, JAQ@dst.dk / SILC@dst.dk