Workshop on measuring income inequality from the combined use of information sources

Inequality is one of the outstanding features of Latin American societies and overcoming it is a key challenge for development. In a framework of high structural heterogeneity of the productive systems and insufficient public and private institutional arrangements to reduce the gaps, inequality is expressed in various dimensions of well-being. Among them, inequality in the distribution of income is particularly relevant, because income largely conditions access to the different goods and services necessary for life and the opportunities of people to develop.

Inequality analysis based on household surveys, which is the main source for measuring income inequality, is associated with two common phenomena. The first is the lack of information on very high-income households. The second is the underreporting of income, whether involuntary or intentional. As a result, measures of inequality in income distribution based exclusively on data from household surveys underestimate the magnitude of the phenomenon.

To more fully capture income inequality, it is possible to combine information from household surveys with information from income tax payment records, especially relevant for higher income earners, and with national accounts. , which provide a frame of reference on the total amount of national gross income that is distributed to households. The World Inequality Lab (WIL) of the Paris School of Economics has developed guidelines for estimating inequality through the integration of information sources and the construction of distributive national accounts. The proposed method -which is characterized by being “bottom up”- is complementary to a previous exercise, carried out by the Central Bank of Costa Rica, based on the OECD methodology. The latter can be considered as “top-down” insofar as it distributes the aggregates of the national accounts by population groups. Comparison between the results of one method and the other would allow a better understanding of the gaps in collection from the different sources, as well as the conceptual differences between the definitions of income and how they impact inequality indicators.

The ECLAC Statistics Division implements the project “Inequality: Innovative approaches for examining inequality through integration of different data sources in Latin America and the Caribbean”, with the support of the United Nations Development Account (13th tranche). One of the components of this project aims to work together with the countries of the region to analyze the possibilities of integrating income data from household surveys, tax records and national accounts, and using them to estimate income inequality. .

Within this framework, this workshop, carried out in collaboration with the Central Bank of Costa Rica, aims to present the methodology, the information requirements and the results of a first estimate of inequality, to public and academic institutions interested in the subject. . In this meeting, the data inputs necessary to improve the available estimates and the future steps for a broader collaboration between the participating institutions will be discussed, which will allow improving and expanding the estimates that are presented.