Incorporating Unrealized Capital Gains into Income: Impact and Sensitivity of Different Imputation Methods

• Activity Number: 252
• Type: Contributed
• Date/Time: Monday, August 10, 2015 : 2:00 PM to 3:50 PM
• Sponsor: Social Statistics Section
• Author(s): Jeffrey Thompson*
• Companies: Federal Reserve Board
• Keywords: inequality ; income ; wealth ; capital gains

Abstract

Unrealized capital gains are not reported on any income survey, but represent an important source of potential consumption for asset-holding households. Increasingly inequality researchers are incorporating estimates of unrealized capital gains into measures of household income distribution, but with differing imputation approaches and results (Wolff and Zacharias, 2006; Smeeding and Thompson, 2011; Armour, Larrimore and Burkhauser, 2014). This paper reviews and compares the differing approaches for estimating unrealized gains using data from the Survey of Consumer Finances, and identifies the implications of the different approaches for measures of income, potential consumption, and distribution statistics.