The Inequality (or the Growth) we Measure: Data Gaps and the Distribution of Incomes

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May 2022
Paper author(s): 
Facundo Alvaredo
Mauricio de Rosa
Ignacio Flores
Marc Morgan
Poverty - Inequality - Aid Effectiveness

There is a large gap between income estimates used in inequality studies and macroeconomic statistics. This makes it hard to assess how economic growth is distributed across the population, and to what extent mainstream distributional statistics are an accurate representation of income flows. We take stock of these discrepancies by confronting estimates of the income distribution from surveys, administrative records and aggregates from the system of national accounts, thoroughly documenting them over the past two decades for ten Latin American countries. We find that surveys only account for around half of the macroeconomic income in the region. Measurement gaps account for just over half of the overall gap on average, while the rest is due to conceptual differences across data sets. Measurement gaps have been growing fast for many countries, the bulk being due to non-covered capital income. We also compare the top tails in administrative data and surveys, finding diverging averages –especially for non-wage incomes– and different shapes. We discuss the degree to which inequality levels and trends could be affected.


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