Income inequality in the city of Moscow on the eve of the Russian revolution (the estimates from 1917 income tax returns)

The article presents the estimates of income inequality for the city of Moscow on the eve of the February Revolution. The study draws upon income tax returns submitted to tax offices by March of 1917 supplemented by the data on wages the city council paid to its workers and employes in 1916. Tax returns provide disaggregated data on top incomes, while wages, averaged across four income groups, stand in for lower and middle incomes. These two types of data are combined to construct a social table and estimate Gini coefficient and the income shares of top 10 and 1% of income earners. Both estimates indicate a relatively high level of inequality in pre-revolutionary Moscow, with Gini coefficient standing at 0.64 for the rich and 0.67 for the entire working population and top 1% share reaching 37% of total gross income. The estimated top 1% share is strikingly similar to the result obtained earlier by P. Lindert and S. Nafziger for 1904, however, it is important to stress that their estimates reflect the level of inequality among households in the whole Moscow provinces, so the comparison must be treated with caution. This calls for further discussion of how the way we construct a social table relates to the resulting estimates of income inequality. Altering our assumptions regarding the size and average income of the vast lower class at the bottom of a social table, – for example, adding rural residents of the province, mostly peasants, to the bottom of the table and simultaneously depressing an average income of the poor, – may well result in much higher estimates of inequality. However, if we inflate population count of the poor but keep an average income relatively close to our initial estimates, the level of inequality will be lower compared to the findings presented in the article.