New website reveals the magnitude of inequality in Latin America

Official statistics on inequality in Latin America, exclusively based on surveys, only capture half of the macroeconomic income and underestimate capital income. This creates a misleading perception of societies that appear to be poorer and less unequal. When this bias is corrected, inequality increases significantly.

A new website – Distribuciones – offers a more precise and heterogeneous picture of inequality trends in ten countries in the region: Argentina, Brazil, Chile, Costa Rica, Colombia, Ecuador, Mexico, Peru, El Salvador, and Uruguay, over the last decade.

Distribuciones allow interactive exploration of data and choosing indicators for cross-country comparisons. It is divided into three parts:

• Pre-tax inequality
• Post-tax inequality
• Distribution of disposable income

 

Professor Marc Morgan, who contributed to the website, commented:
“We hope that the work behind this website contributes to enriching the debate on economic inequality in Latin America. By contrasting and reconciling different data sources, we want to engage the various people involved in its development. From professional statisticians and public officials to citizens whose incomes are being measured, to politicians whose initiatives can improve the quality of data and the trend of inequality.”

 

Key findings:

• Latin America is one of the most unequal regions in the world. Mexico, Peru, and Chile  have maintained extreme levels of inequality in the region. In Mexico, the top 1% of the population captures an astonishing 27% of the national income, while in Peru, this figure reaches 25%, and 24% in Chile.
• In terms of fiscal policies, in most Latin American countries, the effective tax rate decreases for higher incomes, with the exception of Colombia, El Salvador, and especially Uruguay. The middle and lower-income households in Mexico and Chile are considerably more taxed, on average, than in the rest of the countries.
• Despite cash transfers, which partially counteract this regressive effect, post-tax inequality remains substantial in the region.
• Data quality is highly heterogeneous in the region. More efforts are needed to investigate inequality leveraging the local knowledge of data producers and researchers.

 

 

Ignacio Flores, regional coordinator for Latin America at the World Inequality Lab, stated:
“The redistributive experience of Latin America in the early 21st century was successful in increasing lower incomes and reducing labor inequality, but it has not succeeded in redistributing higher incomes and capital income in particular.”

 

 

RESEARCHERS BEHIND THE PROJECT

• Ignacio Flores, regional coordinator for Latin America, World Inequality Lab, researcher at Roma III and Paris School of Economics (PSE)
• Marc Morgan, professor at the Département d’histoire, économie et société of the Université de Genève, and Fellow at the World Inequality Lab
• Mauricio De Rosa, researcher at the Institute of Economics of the University of the Republic, and Fellow at the World Inequality Lab

 

MEDIA CONTACT

• Alice Fauvel, Communications Manager, World Inequality Lab, alice.fauvel@psemail.eu, +33(0)763918168