Falling inequality and the growing capital income share: Reconciling divergent trends in survey and tax data

Burdín, Gabriel; Rosa, Mauricio De; Vigorito, Andrea; Vilá, Joan

doi:10.1016/j.worlddev.2021.105783

Cited by 9 publications

(11 citation statements)

References 38 publications

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“…stability or even an increase in top 1% income shares. This is not surprising, and has been found for countries such as Brazil, Colombia or Uruguay (Morgan, 2018;Souza, 2018;Alvaredo and Londoño-Vélez, 2013;Burdín et al, 2022). This should be kept in mind when comparing competing narratives.…”

Section: Making Sense Of Divergent Trendsmentioning

confidence: 61%

“…Recent top incomes literature based on tax data has shown a more persistent pattern of inequality -particularly from the perspective of top income concentration-in this period (Alvaredo, 2010;Alvaredo and Londoño Velez, 2014;Morgan, 2018;Souza, 2018;Burdín et al, 2022;Flores et al, 2020). 20 Making sense of divergent trends is not straightforward, since there are differences in units (adults, households), income definitions (pre or post-tax) and more importantly, the differences in the way top income groups are accounted for in different sources and the coverage of capital incomes, not only in surveys but also in top-corrected surveys compared with the national accounts (Alvaredo et al, 2022).…”

Section: The Conventional Narrative and Its Limitsmentioning

confidence: 97%

“…This conclusion is supported by Winkelried and Escobar (2020), who reveal for the case of Peru that a range of simulated adjustments to the top tail of the survey-using Pareto models and top income shares from other countries-still produce declining Gini coefficients. Burdín et al (2022) study pre-tax adults inequality for the Uruguayan case between 2009 and 2016. They find that synthetic inequality indices fall according to survey data and administrative data (the latter supplemented by survey data for the unaccounted population and incomes), but find divergent trends for top income shares.…”

Section: The Conventional Narrative and Its Limitsmentioning

confidence: 99%

“…Thus, to avoid comparability problems in this area throughout this study we use per-capita household income as the reference unit of analysis. Note that this is in turn only possible because we depart from surveys and adjust them using administrative data not the other way around as is the case in most studies on developed and underdeveloped countries (Piketty et al, 2018;Garbinti et al, 2018;Burdín et al, 2022;Flores, 2021). 21 Nevertheless, in order to clarify the effect of this issue on trends, in Figure A.1 we show the evolution of the Gini coefficient in the World Bank's database and in the surveys we use from ECLAC's database according to alternative unit definitions.…”

Section: Making Sense Of Divergent Trendsmentioning

confidence: 99%

“…This trend has even been viewed as historically unprecedented in a region characterised by extreme inequality legacies (Bértola and Williamson, 2017). However, its narrative, built on the use of publicly available household survey data, has come to be questioned by the increasing use of administrative data on upper incomes in the region (Alvaredo, 2010;Alvaredo and Londoño Velez, 2014;Morgan, 2018;Souza, 2018;Flores et al, 2020;Burdín et al, 2022), which have shown either milder reductions in top income concentration or more stable, if not increasing, trends in some countries. These doubts are compounded by the large discrepancies between incomes in micro data sources (surveys, tax data) and the national accounts.…”

Section: Introductionmentioning

confidence: 99%

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More Unequal or Not as Rich? Revisiting the Latin American Exception

Rosa¹,

Flores²,

Morgan³

2022

Preprint

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Latin America is often portrayed as a global exception to the rising or consolidating inequality trends of the early twenty-first century. However, the use of administrative data and macroeconomic aggregates casts doubts on this survey-based narrative. In this paper we ask whether the region was exceptional after all. We address this question by building the most comprehensive database thus far, which accounts for 80% of the region's population and combines harmonized surveys, social security and tax data, and national accounts. We produce a set of inequality indicators—pre- and post-tax, based on alternative units and income definitions—which allows us to track the distributional effects of each methodological decision and reconcile divergent trends. The reconciliation of micro and macro data present us with a dilemma: either the region is more unequal than previously thought or it is not as rich. While the downward inequality trend did exist for some countries, it is not present for the entire region. The falling inequality narrative does hold for the bottom 99% post-tax incomes—more so when social spending is considered—but flattens or reverses in the largest economies once capital incomes and the top 1% are better accounted for. These results confirm the strengths and highlight the limits of Latin America's redistributive policies during the period. (Stone Center on Socio-Economic Inequality Working Paper)

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Section: Making Sense Of Divergent Trendsmentioning

confidence: 61%