The Mirrlees Review of taxation in the United Kingdom is a landmark in the analysis of U.K. fiscal policy, and of wide interest to public finance economists around the world. This review concentrates on what we can learn from the Review about the current state of public economics and directions for future research.

This paper examines the role of secondary data-sets in empirical economic research, taking the field of income distribution as a case study. We illustrate problems faced by users of “secondary” statistics, showing how both cross-country comparisons and time-series analysis can depend sensitively on the choice of data. After describing the genealogy of secondary data-sets on income inequality, we consider the main methodological issues and discuss their implications for comparisons of income inequality across OECD countries and over time. The lessons to be drawn for the construction and use of secondary data-sets are summarized at the end of the paper.

A recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics. Top incomes represent a small share of the population but a very significant share of total income and total taxes paid. Hence, aggregate economic growth per capita and Gini inequality indexes are sensitive to excluding or including top incomes. We discuss the estimation methods and issues that arise when constructing top income share series, including income definition and comparability over time and across countries, tax avoidance, and tax evasion. We provide a summary of the key empirical findings. Most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks. Top income shares do not recover in the immediate postwar decades. However, over the last thirty years, top income shares have increased substantially in English speaking countries and in India and China but not in continental European countries or Japan. This increase is due in part to an unprecedented surge in top wage incomes. As a result, wage income comprises a larger fraction of top incomes than in the past. Finally, we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open.