New Top and Bottom Coding Methodology applied to LIS Inequality and Poverty Key Figures

Following the new top and bottom coding procedures used for the computation of Data Access Research Tool (DART) indicators, LIS has adopted this new practice of setting extreme income values for a bottom and top code for its Inequality and Poverty Key Figures.

This new procedure first defines the interquartile range (IQR) of the logarithm of the income and detects values which could possibly be assessed as outliers (3 times below or above the IQR). The new measure keeps inequality measures much closer to the non-top and bottom coded measures as compared to the previous approach but serves to smoothen inequality trends to a reasonable amount by consistently reducing the influence of extreme values for within- and between-country comparisons. Please note, that we also updated our programs section on the website, where we provide the syntax with the new methodology to replicate the numbers in LISSY.

For more information about the new top and bottom coding methodology and a comparison to the previous applied methodology, please read this article by Jörg Neugschwender (LIS Data Quality Coordinator and Research Associate).

December 10, 2021 | News