How Many Brackets Should We Ask for to Derive Adequate Metric Information for Income and Wealth?

Authors: Max Longmuir and Markus M. Grabka

Publication: Survey Research Methods. vol. 18, no. 3. pp. 251–261.

Date: December 2024

Abstract:

This paper investigates how the number of brackets and the choice of upper cutoffs in grouped data affect the metric approximation of income and wealth. The literature currently lacks a definition of what should be considered too few brackets or too-low cut-offs. Using German survey data, we show that more than six (eight) brackets and an upper cut-off at the 95th (97th) percentile are sufficient to provide an adequate approximation of the income (wealth) distribution.

Link: How Many Brackets Should We Ask for to Derive Adequate Metric Information for Income and Wealth?