More Unequal or Not as Rich? Revisiting the Latin American Exception

Latin America is often portrayed as a global exception to the rising or consolidating income inequality trends of the early twenty-first century. However, the use of administrative data and macroeconomic aggregates casts doubts on this surveybased narrative. In this paper we revisit the region’s exceptionalism by building the most comprehensive data base thus far, which accounts for 80% of the region’s population and combines harmonised surveys, social security and tax data, and national accounts. We produce a set of inequality indicators —pre and post-tax, based on alternative units and income definitions— which allows us to track the distributional effects of each methodological step and reconcile divergent trends. The reconciliation of micro and macro data present us with a dilemma: either the region is more unequal or it is not as rich as officially reported. The result of distributing the data gaps is a region much more heterogeneous in its inequality trends. Falling inequality is most visible among the bottom 99%, but the trend flattens or reverses in the largest economies once the top 1% and capital incomes are better accounted for. Post-tax and disposable incomes do not change the picture much, except when in-kind social spending is considered. These results confirm the strengths and highlight the limits of Latin America’s redistributive policies during the period.

AUTHORS

• Mauricio De Rosa, Paris School of Economics, mauricioderosa@gmail.com
• Ignacio Flores, Paris School of Economics; Stone Center, City University of New York, ignacio.flores@psemail.eu
• Marc Morgan, Paul Bairoch Institute of Economic History, University of Geneva, marc.morgan@unige.ch

MEDIA CONTACT

• press@wid.world.com

ACKNOWLEDGEMENTS

We are grateful to the Statistics Division of the United Nation’s Economic Commission for Latin America and the Caribbean (ECLAC) for sharing their harmonised household surveys. We also thank the Uruguayan tax agency (DGI), as well as the statistics division of the Peruvian tax agency (SUNAT) for preparing income tax tabulations for this study; Catalina Galdamez Vanegas for kindly sharing Salvadorian income tax tabulations with us; and Alvaro Zuniga-Cordero for sharing his estimations on Costa Rican inequality using administrative data. We gratefully acknowledge financial support from the European Research Council (ERC Grant 856455), the French Research Agency (EUR Grant ANR-17-EURE-0001), and the Institute for New Economic Thinking.