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What's Behind the Inequality We Measure: An Investigation Using Latin American Data

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  • Székely, Miguel
  • Hilgert, Marianne

Abstract

The use of income distribution indicators in the economics literature has increased considerably in recent years. This work relies on household surveys from 18 LAC countries to take a step back from the use of these indicators, and explore what's behind the numbers, and what information they convey. We find: a) that the way countries rank according to inequality measured in a conventional way is to a large extent an illusion created by differences in characteristics of the data and on the particular ways in which the data is treated; b) Our ideas about the effect of inequality on economic growth are also driven by quality and coverage differences in household surveys and by the way in which the data is treated; c) Standard household surveys in LAC are unable to capture the incomes of the richest sectors of society; so, the inequality we are able to measure is most likely a gross underestimation. Our main conclusion is that there is an important story behind each number. This story influences our judgement about how unequal countries are and about the relation between inequality and other development indicators, but it is seldom told or known. Perhaps other statistics commonly used in economics also have their own interesting story, and it might be worth trying to find out what it is.

Suggested Citation

  • Székely, Miguel & Hilgert, Marianne, 1999. "What's Behind the Inequality We Measure: An Investigation Using Latin American Data," IDB Publications (Working Papers) 1309, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:1309
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    Citations

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    Cited by:

    1. Branko Milanovic, 2002. "True World Income Distribution, 1988 and 1993: First Calculation Based on Household Surveys Alone," Economic Journal, Royal Economic Society, vol. 112(476), pages 51-92, January.
    2. José Palma, 2015. "Globalizing Inequality: ‘Centrifugal’ and ‘Centripetal’ Forces at Work," Working Papers id:7199, eSocialSciences.
    3. Pablo Astorga, 2024. "Revealing The Diversity And Complexity Behind Long-Term Income Inequality In Latin America, 1920-2011," Working Papers 0250, European Historical Economics Society (EHES).
    4. Timothy M. Smeeding, 2002. "Globalization, Inequality, and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)," Center for Policy Research Working Papers 48, Center for Policy Research, Maxwell School, Syracuse University.
    5. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    6. Morley, Samuel A., 2001. "Distribution and growth in Latin America in an era of structural reform," TMD discussion papers 66, International Food Policy Research Institute (IFPRI).
    7. Gabriel Burdin & Fernando Esponda & Andrea Vigorito, 2004. "Inequality and Top Income in Uruguay: A Comparison between Household Surveys and Income Tax Micro-data," World Inequality Lab Working Papers halshs-02654095, HAL.
    8. Fairfield, Tasha & Jorratt, Michel, 2014. "Top income shares, business profits, and effective tax rates in contemporary Chile," LSE Research Online Documents on Economics 56016, London School of Economics and Political Science, LSE Library.
    9. Miguel Szekely & Nora Lustig & Martin Cumpa & Jose Antonio Mejia, 2004. "Do we know how much poverty there is?," Oxford Development Studies, Taylor & Francis Journals, vol. 32(4), pages 523-558.
    10. Angus Deaton, 2003. "Data for monitoring the poverty MDG," Human Development Occasional Papers (1992-2007) HDOCPA-2003-02, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    11. Szekely, Miguel, 2003. "The 1990s in Latin America: Another Decade of Persistent Inequality, but with Somewhat Lower Poverty," Journal of Applied Economics, Universidad del CEMA, vol. 6(2), pages 1-26, November.

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    More about this item

    Keywords

    household surveys; WP-409; inequality; income distribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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