Last week, Financial Times economics editor Chris Giles alleged that the data on wealth inequality over the past 200 years that Thomas Piketty has used in his recent bestseller Capital in the Twenty-First Century does not support the central thesis of the book: that wealth inequalities in Europe and the US have grown over the past 30 years, because of a greater concentration of wealth in the hands of the rich.

Giles suggests that Piketty has made mistakes in the way he assembled and presented the data, and that when they are assembled correctly, the wealth share of the richest 1% and 10% in Britain and other countries has been relatively stable since 1980, because of errors and inaccuracies in the way Piketty has presented the data.

Giles argues that when he returns to the data and assembles them correctly, there is no tendency for the wealth share of the top 1% or the top 10% in advanced industrialised countries to have risen since 1980.

In this Datablog post, I re-examine the wealth inequality data for the UK, since this is the country where Chris Giles's adjustments make the most difference to Piketty's original data.

The graph below shows the time series of data between 1810 and 2010 on the shares of the wealthiest 10% and the wealthiest 1% of the population for the UK – as presented by Piketty (in blue) and with Giles's preferred corrected series (in red, with the dotted red line between 2000 and 2010 showing an alternative estimate for 2010 discussed further below). For the period after 1970, Piketty's data series shows rising wealth inequality using the 1% and the 10% measure, whereas Giles's data series shows falling wealth inequality.

First graph. Chart by Howard Reed

The differences between the two series after 1970 are so extreme that this prompted me to re-examine the original data. This is straightforward, as Piketty has (commendably) published his original data sources online, and Giles has (equally commendably) done the same for his modified data.

After re-examining the data I have concluded that the differences between Piketty and Giles are largely due to their treatment of different estimates of the level of wealth inequality in the five different data sources used in the analysis.

Because there is no consistent data source which can be used to measure inequality over the whole of the past 200 years for the UK, Piketty uses six different data sources. These are as follows (detailed references are provided in the spreadsheet, which can be downloaded at the end of this article):

These six different data sources use different methods for collecting the data and for estimating the distribution of wealth based on the data, and there are substantial differences between the estimates of wealth shares for the top 10% in particular, using the different series. Chris Giles's original blogpost contains a detailed plot of each data series.

I have identified three major discontinuities between the series:

for the years 1974-81 where both series (b) and (c) are available, series (c) gives an estimate of the top 10% wealth share that is on average 6 percentage points lower than series (b)



for the years 1976-81 where both series (c) and (d) are available, series (d) gives an estimate of the top 10% wealth share that is on average 6 percentage points lower than series (c)



the first estimate from series (f) for 2006 is around 11 percentage points lower than the final estimate from series (d), for 2005



Taken as a whole, these discontinuities imply that the estimate of the top 10% share of wealth is 22.5 percentage points lower by 2010 than it would have been if the wealth statistics had been collected on a consistent basis after 1974 as they were before 1974.

As I demonstrate below, the main difference between the Piketty time series for UK inequality and the Giles time series for UK inequality, is that Piketty corrects his data series to allow for this 23 percentage-point drop (caused by changes in the methodology used to measure the wealth distribution), whereas Giles does not. While Giles has made it clear to me in private correspondence that he was fully aware of the discontinuities in the data series, he chose not to correct his final published data series to allow for them.



For the top 1%, the discontinuities in the data have a much smaller effect, leading to a 10 percentage-point drop in total (most of which is accounted for by the difference between series (d) and series (f). Again, Piketty corrects his data series to take account of this difference, whereas Giles does not.

The second graph, below, shows Chris Giles's estimates for the top 1% and 10% wealth shares graphed against the raw wealth share data using the following series for specific periods of time:

series (a): 1810-70



series (b): 1923-74



series (c): 1974-76



series (d): 1976-2005



series (e): not used (because HMRC recommend that it should not be used as a measure of wealth distribution)



series (f): 2006-10



Second graph. Chart by Howard Reed

Overall, the two time series match very closely (with the exception of some fluctuations in the raw data between 1960 and 1980, but the general trend between 1960 and 1990 is nonetheless accurate). This shows that Giles has failed to take account of discontinuities in the data series caused by the way wealth is measured.

To be fair, Giles does present an alternative estimate for 2010 which uses series (e) rather than series (f) (shown as a dotted line on graph one), but this is not his preferred measure. To believe that the Giles series represents an accurate picture of the evolution of wealth inequality in the UK over the last 50 years, one would have to believe that the wealth share of the top 10% really did fall by 12 percentage points during the 1970s, and by another 11 percentage points between 2005 and 2006.

Does anyone really believe this? Of course not. Instead, changes to the way wealth inequality is measured have caused our estimate of wealth inequality to jump downwards at various specific points in time – 1974, 1976 and 2006 in Graph 2. And it is these measurement changes which are driving Giles's results.

The third graph, below, presents corrected versions of the raw data for the top 1% and top 10%, removing these discontinuities. This means that by 2006, the statistic for top 10% wealth share is 23 percentage points higher using this raw series than it is in second graph above.

Third graph. Chart by Howard Reed

The corrected raw data in the third graph, above, matches Piketty's published wealth inequality series closely for the most part, although not perfectly. There are three main differences:

(i) the raw data for the 10% share between 1810 and 1920 looks slightly different (as Giles discussed in his blog post, Piketty seems to have made slight errors in the wealth statistic for 1870 and inserted an additional data points for 1910) but this does not change the overall pattern of the graph significantly. (ii) There are some discrepancies between the raw data and Piketty's series for 1970 (where the raw data are higher than Piketty's data point) and 1990 (where the raw data are lower than Piketty's data point). However, the overall trend between 1960 and 2000 in the raw data is very close to the trend in Piketty's data. (iii) There does not appear to be an increase in the wealth shares of the top 1% or the top 10% between 2000 and 2010 in the raw data: conversely, Piketty's data shows a slight increase. However, the wealth share of the top 10% has still increased substantially since 1980 using the raw data; there has also been an increase since 1980 for the top 1% but this pattern is less marked.

Overall, the Piketty series, while not a perfect representation of the raw data (adjusted for discontinuities), fits the pattern of underlying changes in wealth inequality much better than the Giles series, which is largely an artefact of the discontinuities.



Chris Giles's initial inquiry into Piketty's results was caused by the discrepancy between Piketty's estimate of UK top 10% wealth share in 2010 (71%) and the ONS estimate from the Wealth and Assets Survey (44%).

However, the vast majority of this discrepancy (23 percentage points out of 27) is, as I have shown in this post, due to data discontinuities.

Giles argues that the data from the Wealth and Assets Survey are a more accurate measure of wealth inequality than the data from Inland Revenue estate returns used in the earlier data series. This may well be true across the population as a whole (although WAS is unlikely to sample the very wealthiest few hundred people featured in surveys like the Sunday Times Rich List, for example). But, if we were to agree that the top 10% share in 2010 should be 44%, it would still be necessary to correct for discontinuities with earlier data: this would necessitate moving the top 10% line down 23 percentage points, and the top 1% line down 10 percentage points, so that the wealth series was consistent with WAS across the whole time period.

This article has only analysed data for the UK because that is the country where the differences between Piketty's figures for wealth inequality and Giles's are most obvious and pronounced.

It is worth making a final point regarding international comparisons. It is very difficult to compare wealth inequality estimates from the UK Wealth and Asset Survey with estimates for other countries based on estate returns from the equivalent of HMRC in other countries, because we know for the UK that WAS gives a much lower estimate of wealth inequality than the estate multiplier method using HMRC inheritance tax returns.

Furthermore, different time series using estate returns data (e.g. series (b), (c) and (d) above) exhibit large differences in the estimates for the top 10% share in particular. This suggests that international comparisons of the levels of wealth inequality are especially fraught with difficulty; unless we can be sure that the data sources are collected using a completely consistent methodology across countries, we may be simply measuring differences in the way wealth is measured rather than genuine differences in wealth distribution across national economies.

To summarise, Chris Giles's investigation of Piketty's data has uncovered some errors and inconsistencies which Piketty will hopefully address in future work. This shows the importance of quality assurance and third party checking of all results from statistical analysis – particularly when they involve spreadsheets, where it is very easy to make errors.

However, Giles then goes on to make a very serious error of his own in handling the UK data: he treats changes in the way wealth inequality is measured over the decades as if they were real changes in the underlying distribution of wealth. This error leads him to the misleading conclusion that wealth inequality fell in the UK between 1980 and 2010, whereas in fact it has increased (although not by quite as much as Piketty's published results would suggest).

• Howard Reed is director of the economic research consultancy Landman Economics

• This article was updated on the 30 May 2014 to make it clear that Chris Giles had - since the article was first published - contacted the author to say that he had at least considered the issue of discontinuities

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