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

Abstract

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)

Wealth Inequality in Latin America

“…Furthermore, Figure 4 provides summary statistics of the overall concentration through the Gini coefficient in panel (a). The Gini coefficient shows that survey-based wealth inequality is extremely high, ranging from 0.7 to 0.9, much higher than for income, whether survey-based (Gandelman and Lluberas, 2023) or under Distributional National Accounts (De Rosa et al, 2022). Interestingly, the Gini coefficients show a very similar pattern to that of the top 10% shown in panel (b), both when comparing country differences and trends over time.…”

Compositional Inequality: Measurement, Stylized Facts, and Normative Aspects

“…This result is further confirmed by Monroy-Gómez-Franco and Ranaldi (2024), who focus on compositional inequality in Latin America (Figure 4). Their confirmation comes through the use of a more comprehensive database that combines fiscal data, survey data, and national accounts recently produced by De Rosa et al (2023). The second cluster is composed of western countries including the US, Canada and the UK.…”

Stratification economics in the land of persistent inequalities

“…On the contrary, the literature that corrects the underestimation of capital income in household surveys has identified that the distribution of total income in Mexico during the XXIst century remains very unequal 6 . Although the point estimates vary depending on the correction methodology employed, the Gini coefficient for total income in Mexico during the first two decades of the XXIst century remained between 65 and 70 points (Bustos & Leyva, 2017; De Rosa et al, 2020; Del Castillo‐Negrete‐Rovira, 2017a). This represents a gap of 10 and 15 points concerning the raw data in the survey.…”