IDEAS home Printed from https://ideas.repec.org/a/kap/jecinq/v14y2016i4d10.1007_s10888-016-9337-3.html
   My bibliography  Save this article

Fundamental accrued capital gains and the measurement of top incomes: an application to Chile

Author

Listed:
  • Ramón E. López

    () (University of Chile)

  • Eugenio Figueroa B.

    () (University of Chile)

  • Pablo Gutiérrez C.

    () (University of British Columbia)

Abstract

Most previous studies of income inequality have either ignored capital gains or have used taxable realized capital gains to estimate top incomes. Neither of these approaches is fully satisfactory. We apply for the first time a new methodology that allows us to account for fundamental accrued capital gains as part of the top incomes in a theoretically consistent manner. We estimate the shares of the super-rich in Chile showing that accrued capital gains have a large impact on these estimates. Also, the top income shares estimated using fundamental capital gains appear to exhibit a more stable and presumably more plausible time profile than estimates based on capital gains derived from asset market variations.

Suggested Citation

  • Ramón E. López & Eugenio Figueroa B. & Pablo Gutiérrez C., 2016. "Fundamental accrued capital gains and the measurement of top incomes: an application to Chile," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(4), pages 379-394, December.
  • Handle: RePEc:kap:jecinq:v:14:y:2016:i:4:d:10.1007_s10888-016-9337-3
    DOI: 10.1007/s10888-016-9337-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10888-016-9337-3
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jorratt De Luis, Michel & Fairfield, Tasha, 2015. "Top Income Shares, Business Profits, and Effective Tax Rates in Contemporary Chile," Working Papers 13744, Institute of Development Studies, International Centre for Tax and Development.
    2. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2009. "Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data," Working Papers 09-26, Center for Economic Studies, U.S. Census Bureau.
    3. Gutiérrez C., Pablo & López, Ramón E. & Figueroa B., Eugenio, 2015. "Top income measurement and undistributed profits," Economics Letters, Elsevier, vol. 134(C), pages 138-140.
    4. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    5. 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.
    6. Claudia Sanhueza & Ricardo Mayer, 2011. "Top Incomes in Chile using 50 years of household surveys : 1957-2007," Estudios de Economia, University of Chile, Department of Economics, vol. 38(1 Year 20), pages 169-193, June.
    7. Branko Milanovic & Tasha Fairfield & Michel Jorratt De Luis, 2016. "Top Income Shares, Business Profits, and Effective Tax Rates in Contemporary Chile," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62, pages 120-144, August.
    8. Dante Contreras & Osvaldo Larrañaga & Julie Litchfield, 2001. "Poverty and Income Distribution in Chile: 1987-1998 New Evidence," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 191-208.
    9. Daniel R. Feenberg & James M. Poterba, 1993. "Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns," NBER Chapters, in: Tax Policy and the Economy, Volume 7, pages 145-177, National Bureau of Economic Research, Inc.
    10. Jesper Roine & Daniel Waldenström, 2012. "On The Role Of Capital Gains In Swedish Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(3), pages 569-587, September.
    11. Philip Armour & Richard V. Burkhauser & Jeff Larrimore, 2016. "Using The Pareto Distribution To Improve Estimates Of Topcoded Earnings," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1263-1273, April.
    12. Philip Armour & Richard V. Burkhauser & Jeff Larrimore, 2013. "Deconstructing Income and Income Inequality Measures: A Crosswalk from Market Income to Comprehensive Income," American Economic Review, American Economic Association, vol. 103(3), pages 173-177, May.
    13. Anthony Atkinson & Thomas Piketty, 2007. "Top incomes over the twentieth century: A contrast between continental european and english-speaking countries," Post-Print halshs-00754859, HAL.
    14. Ramón E. López & Eugenio Figueroa B. & Pablo Gutiérrez C., 2013. "La ‘parte del león’: Nuevas estimaciones de la participación de los súper ricos en el ingreso de Chile," Working Papers wp379, University of Chile, Department of Economics.
    15. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland Over the Twentieth Century," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 412-421, 04/05.
    16. Tasha Fairfield & Michel Jorratt De Luis, 2016. "Top Income Shares, Business Profits, and Effective Tax Rates in Contemporary Chile," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(S1), pages 120-144, August.
    17. A. B. Atkinson, 2005. "Top incomes in the UK over the 20th century," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(2), pages 325-343, March.
    18. Mervyn A. King, 1974. "Taxation and the Cost of Capital," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 21-35.
    19. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland over the Twentieh Century," Post-Print hal-00813565, HAL.
    20. Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
    21. Richard V. Burkhauser & Shuaizhang Feng & Stephen P. Jenkins & Jeff Larrimore, 2012. "Recent Trends in Top Income Shares in the United States: Reconciling Estimates from March CPS and IRS Tax Return Data," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 371-388, May.
    22. Alvaredo, Facundo, 2011. "A note on the relationship between top income shares and the Gini coefficient," Economics Letters, Elsevier, vol. 110(3), pages 274-277, March.
    23. Timothy M. Smeeding & Jeffrey P. Thompson, 2011. "Recent Trends in Income Inequality," Research in Labor Economics, in: Herwig Immervoll & Andreas Peichl & Konstantinos Tatsiramos (ed.), Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution, volume 32, pages 1-50, Emerald Publishing Ltd.
    24. Michael Wolfson & Mike Veall & Neil Brooks & Brian Murphy, 2016. "Piercing the Veil: Private Corporations and the Income of the Affluent," Canadian Tax Journal, Canadian Tax Foundation, vol. 64(1), pages 1-30.
    25. Sebastián Cea & María Ignacia Contreras & Claudia Martínez & Esteban Puentes, 2009. "Trabajadores por cuenta propia: ¿Quienes son? ¿De donde vienen? ¿Para donde van?," Working Papers wp308, University of Chile, Department of Economics.
    26. Atkinson, A. B. & Piketty, Thomas (ed.), 2007. "Top Incomes Over the Twentieth Century: A Contrast Between Continental European and English-Speaking Countries," OUP Catalogue, Oxford University Press, number 9780199286881.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Díaz, Juan D. & Gutiérrez Cubillos, Pablo & Tapia Griñen, Pablo, 2021. "The exponential Pareto model with hidden income processes: Evidence from Chile," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 561(C).
    2. Eduardo Olaberría, 2016. "Bringing all Chileans on board," OECD Economics Department Working Papers 1289, OECD Publishing.
    3. Rabah Arezki & Asif Islam & Grégoire Rota-Graziosi, 2021. "Taming Private Leviathans: Regulation versus Taxation," OxCarre Working Papers 226, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gabriel Burdín & Mauricio de Rosa & Andrea Vigorito & Joan Vilá, 2019. "Was falling inequality in all Latin American countries a data-driven illusion? Income distribution and mobility patterns in Uruguay 2009-2016," Documentos de Trabajo (working papers) 19-30, Instituto de Economia - IECON.
    2. 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.
    3. Gutiérrez C., Pablo & López, Ramón E. & Figueroa B., Eugenio, 2015. "Top income measurement and undistributed profits," Economics Letters, Elsevier, vol. 134(C), pages 138-140.
    4. Stephen P. Jenkins, 2017. "Pareto Models, Top Incomes and Recent Trends in UK Income Inequality," Economica, London School of Economics and Political Science, vol. 84(334), pages 261-289, April.
    5. Gabriel Burdín & Fernando Esponda & Andrea Vigorito, 2014. "Inequality and top incomes in Uruguay: a comparison between household surveys and income tax micro-data," Commitment to Equity (CEQ) Working Paper Series 1321, Tulane University, Department of Economics.
    6. Richard V. Burkhauser & Nicolas Hérault & Stephen P. Jenkins & Roger Wilkins, 2016. "What has Been Happening to UK Income Inequality Since the Mid-1990s? Answers from Reconciled and Combined Household Survey and Tax Return Data," NBER Working Papers 21991, National Bureau of Economic Research, Inc.
    7. H. Xavier Jara & Nicolás Oliva, 2018. "Top income adjustments and tax reforms in Ecuador," WIDER Working Paper Series wp-2018-165, World Institute for Development Economic Research (UNU-WIDER).
    8. Roman Bobilev & Anne Boschini & Jesper Roine, 2020. "Women in the Top of the Income Distribution: What Can We Learn From LIS-Data?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(1), pages 63-107, March.
    9. Katharina Jenderny, 2016. "Mobility of Top Incomes in Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(2), pages 245-265, June.
    10. Charlotte Bartels & Maria Metzing, 2019. "An integrated approach for a top-corrected income distribution," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(2), pages 125-143, June.
    11. repec:iae:iaewps:wp2016n5 is not listed on IDEAS
    12. H. Xavier Jara & Nicolás Oliva, 2018. "Top income adjustments and tax reforms in Ecuador," WIDER Working Paper Series 165, World Institute for Development Economic Research (UNU-WIDER).
    13. Jordá, Vanesa & Niño-Zarazúa, Miguel, 2019. "Global inequality: How large is the effect of top incomes?," World Development, Elsevier, vol. 123(C), pages 1-1.
    14. Díaz, Juan D. & Gutiérrez Cubillos, Pablo & Tapia Griñen, Pablo, 2021. "The exponential Pareto model with hidden income processes: Evidence from Chile," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 561(C).
    15. Winkelried, Diego & Escobar, Bruno, 2020. "Declining inequality in Latin America? Robustness checks for Peru," MPRA Paper 106566, University Library of Munich, Germany.
    16. Pablo García S. & Camilo Pérez N., 2017. "Desigualdad, inflación, ciclos y crisis en Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 44(2 Year 20), pages 185-221, December.
    17. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    18. Rodríguez Weber, Javier, 2015. "Estimación de desigualdad de ingreso y otras variables relacionadas para Chile entre 1860 y 1970. Metodología y resultados obtenidos [Income inequality estimates for Chile between 1860 and 1970. Me," MPRA Paper 68400, University Library of Munich, Germany.
    19. Mauricio de Rosa & Joan Vilá, 2020. "Distributing the missing third: growth and falling inequality in Uruguay 2009-2016," Documentos de Trabajo (working papers) 20-05, Instituto de Economia - IECON.
    20. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2011. "Estimating trends in US income inequality using the Current Population Survey: the importance of controlling for censoring," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(3), pages 393-415, September.
    21. Facundo Alveredo & Juliana Londoño Vélez, 2013. "High incomes and personal taxation in a developing economy: Colombia 1993-2010," Commitment to Equity (CEQ) Working Paper Series 1312, Tulane University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jecinq:v:14:y:2016:i:4:d:10.1007_s10888-016-9337-3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.