IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/106566.html
   My bibliography  Save this paper

Declining inequality in Latin America? Robustness checks for Peru

Author

Listed:
  • Winkelried, Diego
  • Escobar, Bruno

Abstract

Household surveys underreport incomes from the upper tail of the distribution, affecting our assessment about inequality. This paper offers a tractable simulation method to deal with this situation in the absence of extra information (e.g., tax records). The core of the method is to draw pseudodata from a mixture between the income empirical distribution and a parametric model for the upper tail, that aggregate to a preestablished top income share. We illustrate the procedure using Peruvian surveys that, as in the rest of Latin America, have displayed a sustained decrease in the Gini index since the 2000s. In a number of experiments, we impose a larger top income share than the one observed in the data, closer to corrected estimates for less egalitarian neighbors (e.g., Chile). We find that even though the point estimates of the Gini index are biased indeed, the corrected indices still decrease in time.

Suggested Citation

  • Winkelried, Diego & Escobar, Bruno, 2020. "Declining inequality in Latin America? Robustness checks for Peru," MPRA Paper 106566, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:106566
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/106566/1/MPRA_paper_106566.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nak-Nyeon Kim, 2018. "Top Incomes in Korea: Update, 1933-2016"," World Inequality Lab Working Papers hal-02878150, HAL.
    2. Thomas Piketty & Li Yang & Gabriel Zucman, 2019. "Capital Accumulation, Private Property, and Rising Inequality in China, 1978–2015," American Economic Review, American Economic Association, vol. 109(7), pages 2469-2496, July.
    3. 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.
    4. Lucas Chancel & Thomas Piketty, 2019. "Indian Income Inequality, 1922‐2015: From British Raj to Billionaire Raj?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(S1), pages 33-62, November.
    5. Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, February.
    6. 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.
    7. Matthew Smith & Owen Zidar & Eric Zwick, 2020. "Top Wealth in America: New Estimates and Implications for Taxing the Rich," Working Papers 264, Princeton University, Department of Economics, Center for Economic Policy Studies..
    8. Thomas Blanchet & Lucas Chancel & Amory Gethin, 2019. "How Unequal is Europe? Evidence from Distributional National Accounts, 1980-2017," World Inequality Lab Working Papers hal-02877000, HAL.
    9. 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.
    10. Lucas Chancel & Denis Cogneau & Amory Gethin & Alix Myczkowski, 2019. "How large are African inequalities? Towards Distributional National Accounts in Africa, 1990 - 2017," World Inequality Lab Working Papers hal-02876986, HAL.
    11. François Bourguignon, 2015. "Appraising income inequality databases in Latin America," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(4), pages 557-578, December.
    12. Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2018. "Distributional National Accounts: Methods and Estimates for the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 133(2), pages 553-609.
    13. Davidson, Russell & Flachaire, Emmanuel, 2007. "Asymptotic and bootstrap inference for inequality and poverty measures," Journal of Econometrics, Elsevier, vol. 141(1), pages 141-166, November.
    14. Lucas Chancel & Denis Cogneau & Amory Gethin & Alix Myczkowski, 2019. "How large are African inequalities? Towards Distributional National Accounts in Africa, 1990 - 2017," World Inequality Lab Working Papers hal-02876986, HAL.
    15. Anthony Atkinson & Thomas Piketty, 2010. "Top Incomes : A Global Perspective," PSE-Ecole d'économie de Paris (Postprint) halshs-00754875, HAL.
    16. Cowell, Frank A. & Flachaire, Emmanuel, 2007. "Income distribution and inequality measurement: The problem of extreme values," Journal of Econometrics, Elsevier, vol. 141(2), pages 1044-1072, December.
    17. Aaberge, Rolf & Atkinson, Anthony B. & Modalsli, Jørgen, 2020. "Estimating long-run income inequality from mixed tabular data: Empirical evidence from Norway, 1875–2017," Journal of Public Economics, Elsevier, vol. 187(C).
    18. Hajargasht, Gholamreza & Griffiths, William E., 2013. "Pareto–lognormal distributions: Inequality, poverty, and estimation from grouped income data," Economic Modelling, Elsevier, vol. 33(C), pages 593-604.
    19. Verónica Amarante, 2016. "Income Inequality in Latin America: A Factor Component Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(S1), pages 4-21, August.
    20. 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.
    21. Yamada, Gustavo & Castro, Juan & Bacigalupo, José, 2012. "Desigualdad monetaria en un contexto de rápido crecimiento económico: El caso reciente del Perú," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 24, pages 65-77.
    22. Thomas Blanchet & Ignacio Flores & Marc Morgan, 2022. "The weight of the rich: improving surveys using tax data," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(1), pages 119-150, March.
    23. Marco Stampini & Marcos Robles & Mayra Sáenz & Pablo Ibarrarán & Nadin Medellín, 2016. "Poverty, vulnerability, and the middle class in Latin America," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 25(1), pages 1-44, December.
    24. Marc Morgan, 2018. "Income inequality, growth and elite taxation in Brazil: new evidence combining survey and fiscal data, 2001–2015," Working Papers 165, International Policy Centre for Inclusive Growth.
    25. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," World Development, Elsevier, vol. 44(C), pages 129-141.
    26. Lydia Assouad & Lucas Chancel & Marc Morgan, 2018. "Extreme Inequality: Evidence from Brazil, India, the Middle East, and South Africa," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 119-123, May.
    27. repec:iae:iaewps:wp2016n5 is not listed on IDEAS
    28. Christoph Lakner & Branko Milanovic, 2016. "Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession," The World Bank Economic Review, World Bank Group, vol. 30(2), pages 203-232.
    29. Sean Higgins & Nora Lustig & Andrea Vigorito, 2018. "The rich underreport their income: Assessing bias in inequality estimates and correction methods using linked survey and tax data," Working Papers 475, ECINEQ, Society for the Study of Economic Inequality.
    30. Arthur Charpentier & Emmanuel Flachaire, 2019. "Pareto Models for Top Incomes," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-02145024, HAL.
    31. Frank A. Cowell, 2008. "Income Distribution and Inequality," Chapters, in: John B. Davis & Wilfred Dolfsma (ed.), The Elgar Companion to Social Economics, chapter 13, Edward Elgar Publishing.
    32. 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.
    33. 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.
    34. Philip Vermeulen, 2018. "How Fat is the Top Tail of the Wealth Distribution?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 357-387, June.
    35. Peter Paz & Carlos Urrutia, 2015. "Economic Growth and Wage Stagnation in Peru: 1998–2012," Review of Development Economics, Wiley Blackwell, vol. 19(2), pages 328-345, May.
    36. 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.
    37. Nicolas Ruiz & Nicolas Woloszko, 2016. "What do household surveys suggest about the top 1% incomes and inequality in OECD countries?," OECD Economics Department Working Papers 1265, OECD Publishing.
    38. Nora Lustig, 2019. "The “Missing Rich” in Household Surveys: Causes and Correction Approaches," Commitment to Equity (CEQ) Working Paper Series 75, Tulane University, Department of Economics.
    39. Nak-Nyeon Kim, 2018. "Top Incomes in Korea: Update, 1933-2016"," Working Papers hal-02878150, HAL.
    40. Filip Novokmet & Thomas Piketty & Li Yang & Gabriel Zucman, 2018. "From Communism to Capitalism: Private versus Public Property and Inequality in China and Russia," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 109-113, May.
    41. Ignacio Flores & Claudia Sanhueza & Jorge Atria & Ricardo Mayer, 2020. "Top Incomes in Chile: A Historical Perspective on Income Inequality, 1964–2017," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(4), pages 850-874, December.
    42. Burkhauser, Richard V. & Herault, Nicolas & Jenkins, Stephen P. & Wilkins, Roger, 2016. "What Has Been Happening to UK Income Inequality since the Mid-1990s? Answers from Reconciled and Combined Household Survey and Tax Return Data," IZA Discussion Papers 9718, Institute of Labor Economics (IZA).
    43. 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, Decembrie.
    44. Richard Burkhauser & Markus Hahn & Roger Wilkins, 2015. "Measuring top incomes using tax record data: a cautionary tale from Australia," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(2), pages 181-205, June.
    45. Diego Winkelried & Javier Torres, 2019. "Economic mobility along the business cycle. The case of Peru," Applied Economics, Taylor & Francis Journals, vol. 51(18), pages 1894-1906, April.
    46. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
    47. Marat Ibragimov & Rustam Ibragimov, 2018. "Heavy tails and upper-tail inequality: The case of Russia," Empirical Economics, Springer, vol. 54(2), pages 823-837, March.
    48. Xavier Gabaix & Rustam Ibragimov, 2011. "Rank - 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 24-39, January.
    49. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 1-41.
    50. Paul Eckerstorfer & Johannes Halak & Jakob Kapeller & Bernhard Schütz & Florian Springholz & Rafael Wildauer, 2016. "Correcting for the Missing Rich: An Application to Wealth Survey Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(4), pages 605-627, December.
    51. Sean Higgins & Nora Lustig & Andrea Vigorito, 2018. "The Rich Underreport Their Income: Assessing Biases In Inequality Estimates And Correction Methods Using Linked Survey And Tax Data," Commitment to Equity (CEQ) Working Paper Series 70, Tulane University, Department of Economics.
    52. Matthew Smith & Danny Yagan & Owen Zidar & Eric Zwick, 2019. "Capitalists in the Twenty-First Century," The Quarterly Journal of Economics, Oxford University Press, vol. 134(4), pages 1675-1745.
    53. Reed, William J., 2003. "The Pareto law of incomes—an explanation and an extension," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 319(C), pages 469-486.
    54. Emmanuel Saez & Gabriel Zucman, 2020. "Trends in US Income and Wealth Inequality: Revising After the Revisionists," Working Papers halshs-03022102, HAL.
    55. Anand, Sudhir & Segal, Paul, 2017. "Who Are the Global Top 1%?," World Development, Elsevier, vol. 95(C), pages 111-126.
    56. Leonardo Gasparini & Guillero Cruces & Leopoldo Tornarolli, 2011. "Recent Trends In Income Inequality In Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 147-201, January.
    57. Anand, Sudhir & Segal, Paul, 2017. "Who are the global top 1%?," LSE Research Online Documents on Economics 101816, London School of Economics and Political Science, LSE Library.
    58. Atkinson, A. B. & Piketty, Thomas (ed.), 2010. "Top Incomes: A Global Perspective," OUP Catalogue, Oxford University Press, number 9780199286898, Decembrie.
    59. 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.
    60. Facundo Alvaredo & Lucas Chancel & Thomas Piketty & Gabriel Zucman, 2018. "Distributional National Accounts," Post-Print halshs-03342488, HAL.
    61. Louise Cord & Maria Eugenia Genoni & Carlos Rodriguez Castelan, 2015. "Shared Prosperity and Poverty Eradication in Latin America and the Caribbean," World Bank Publications - Books, The World Bank Group, number 21751, December.
    62. Andreas Alfons & Matthias Templ & Peter Filzmoser, 2013. "Robust estimation of economic indicators from survey samples based on Pareto tail modelling," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 62(2), pages 271-286, March.
    63. Francisco H.G. Ferreira & Julian Messina & Jamele Rigolini & Luis-Felipe López-Calva & Maria Ana Lugo & Renos Vakis, 2013. "Economic Mobility and the Rise of the Latin American Middle Class [La movilidad económica y el crecimiento de la clase media en América Latina]," World Bank Publications - Books, The World Bank Group, number 11858, December.
    64. Thomas Piketty, 2003. "Income Inequality in France, 1901-1998," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1004-1042, October.
    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. De Rosa, Mauricio & Flores, Ignacio & Morgan, Marc, 2022. "More Unequal or Not as Rich? Revisiting the Latin American Exception," SocArXiv akq89, Center for Open Science.
    2. Arelys López-Concepción & Ana Gil-Lacruz & Isabel Saz-Gil & Víctor Bazán-Monasterio, 2022. "Social Well-Being for a Sustainable Future: The Influence of Trust in Big Business and Banks on Perceptions of Technological Development from a Life Satisfaction Perspective in Latin America," Sustainability, MDPI, vol. 15(1), pages 1-14, December.

    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. Nora Lustig, 2019. "The “Missing Rich” in Household Surveys: Causes and Correction Approaches," Commitment to Equity (CEQ) Working Paper Series 75, Tulane University, Department of Economics.
    2. Nora Lustig, 2020. "The ``missing rich'' in household surveys: causes and correction approaches," Working Papers 520, ECINEQ, Society for the Study of Economic Inequality.
    3. Bartels, Charlotte & Waldenström, Daniel, 2021. "Inequality and top incomes," GLO Discussion Paper Series 959, Global Labor Organization (GLO).
    4. 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.
    5. 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.
    6. Rafael Carranza & Marc Morgan & Brian Nolan, 2023. "Top Income Adjustments and Inequality: An Investigation of the EU‐SILC," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(3), pages 725-754, September.
    7. 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. Vladimir Hlasny, 2021. "Parametric representation of the top of income distributions: Options, historical evidence, and model selection," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1217-1256, September.
    9. 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 Economía - IECON.
    10. 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).
    11. Emmanuel Flachaire & Nora Lustig & Andrea Vigorito, 2023. "Underreporting of Top Incomes and Inequality: A Comparison of Correction Methods using Simulations and Linked Survey and Tax Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(4), pages 1033-1059, December.
    12. Brzeziński, Michał & Myck, Michal & Najsztub, Mateusz, 2019. "Reevaluating Distributional Consequences of the Transition to Market Economy in Poland: New Results from Combined Household Survey and Tax Return Data," IZA Discussion Papers 12734, Institute of Labor Economics (IZA).
    13. Nora Lustig, 2018. "Measuring the Distribution of Household Income, Consumption and Wealth: State of Play and Measurement Challenges," Working Papers 1801, Tulane University, Department of Economics.
    14. Burdín, Gabriel & De Rosa, Mauricio & Vigorito, Andrea & Vilá, Joan, 2022. "Falling inequality and the growing capital income share: Reconciling divergent trends in survey and tax data," World Development, Elsevier, vol. 152(C).
    15. Metzing, Maria & Bartels, Charlotte, 2016. "An integrated approach for top-corrected Ginis," VfS Annual Conference 2016 (Augsburg): Demographic Change 145818, Verein für Socialpolitik / German Economic Association.
    16. Mathias Silva, 2023. "Parametric models of income distributions integrating misreporting and non-response mechanisms," AMSE Working Papers 2311, Aix-Marseille School of Economics, France.
    17. Branko Milanovic, 2022. "After the Financial Crisis: The Evolution of the Global Income Distribution Between 2008 and 2013," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(1), pages 43-73, March.
    18. Arun Advani & George Bangham & Jack Leslie, 2021. "The UK's wealth distribution and characteristics of high‐wealth households," Fiscal Studies, John Wiley & Sons, vol. 42(3-4), pages 397-430, September.
    19. Martin Ravallion, 2022. "Missing Top Income Recipients," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(1), pages 205-222, March.
    20. Tahnee Christelle Ooms, 2021. "Correcting the Underestimation of Capital Incomes in Inequality Indicators: with an Application to the UK, 1997–2016," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 157(3), pages 929-953, October.

    More about this item

    Keywords

    Top income share; income inequality; Latin America;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • N36 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Latin America; Caribbean
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:pra:mprapa:106566. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.