Distributing the missing third: growth and falling inequality in Uruguay 2009-2016

Most personal income distribution studies present estimates that account for only a fraction of National Income, which prevents us from analyzing inequality and the distribution of growth in a coherent framework. To overcome this caveat, this paper presents inequality estimates accounting for the totality of National Income for Uruguay over the period 2009-2016. We assemble a database that, for the first time, combines all available income data from tax records, household surveys and a variety of ancillary sources, which is then scaled up in order to match National Income. Results show that inequality fell during the period, led by a moderate increase in the National Income share of the bottom 90%, in contrast with the decline in the shares of the top 10% and much moderate for the top 1%. Top 1%’ share shows a decreasing pattern only when undistributed profits are imputed, showing that the inequality trend depends on the complex interplay of income allocation between household and firms. Even with falling inequality, around 45% of the income growth between 2009 and 2016 was accrued by the top 10%, whilst bottom 50% captured less than 14% of new income –a barely higher share than the top 0.1%–, hence widening the absolute incomes gap between groups.