Facundo Alvaredo

Drawing on a comprehensive compilation of quantile shares and inequality measures for 34 countries, including over 5,600 estimated Gini coefficients, we review the measurement of income inequality in Latin America and the Caribbean over the last seven decades. We find that there is quite a bit of uncertainty regarding inequality levels for the same country/year combinations. Differences in inequality levels estimated from household surveys alone are present but they derive from differences in the construction of the welfare indicator, the unit of analysis, or the treatment of the data. With harmonized household surveys, the discrepancies are quite small. The range, however, expands significantly when to correct for undercoverage and underreporting especially at the top of the distribution inequality estimates come from some combination of surveys and administrative tax data. The range increases even further when survey-based income aggregates are scaled to achieve consistency not only with tax registries but with National Accounts. Since no single method to correct for underreporting at the top is fully convincing at present, we are left with (often wide) ranges, or bands, of inequality as our best summaries of inequality levels. Reassuringly, however, the dynamic patterns are generally robust across the bands. Although the evidence roughly until the 1970s is too fragmentary and difficult to compare, clearer patterns emerge for the last fifty years. The main feature is a broad inverted U curve, with inequality rising in most countries prior to and often during the 1990s, and falling during the early 21st century, at least until around 2015, when trends appear to diverge across countries. This pattern is broadly robust but features considerable variation in timing and magnitude depending on the country.

Italy is one the countries with the highest wealth-to-income ratio in the developed world, but knowledge about the size distribution of wealth is currently limited. In this paper we estimate the distribution of personal wealth between 1995 and 2016, a period of economic turbulence and structural reforms. For this, we use a novel source on the full records of inheritance tax files, combined with surveys and national accounts. Unlike available statistics from household surveys alone, our estimates point to a sharp inversion of fortunes between the top and the bottom of the wealth distribution since the mid-1990s. Whereas the level of wealth concentration in Italy is in line with other European countries, its time trend appears more in line with the U.S., showing a large increase. Moreover, Italy stands out as one of the countries with the strongest decline in the wealth share of the bottom 50% of the population. A range of alternative series of wealth concentration, including estimates applying no adjustments and imputations, confirm our main findings. The paper also sheds new light on the determinants of wealth inequality trends. First, we show that although average wealth increases with age, dispersion within age groups remains very high; hence age plays a marginal role in explaining wealth concentration. Second, we show that house prices explain little of the change in wealth across the distribution since 1995. Changes in equity prices account for a large share of wealth growth above the 99th percentile. However, all in all, changes in the volume of assets and savings appear to be the predominant force behind the increase in wealth inequality, even at the top. The probability of top earners to climb to the top of the wealth distribution has doubled since the 2000s. Third, we document the growing role of life-time wealth transfers receipts, their increasing concentration at the top, and their increasingly favourable tax treatment for the wealthy.

There have been important studies of recent income inequality and of poverty in South Africa, but very little is known about the long-run trends over time. There is speculation about the extent of inequality when the Union of South Africa was formed in 1910, but no hard evidence. In this paper, we provide evidence that is partial—being confined to top incomes—but which for the first time shows how the income distribution changed on a (near) annual basis from 1913 onwards. We present estimates of the shares in total income of groups such as the top 1% and the top 0.1%, covering the period from colonial times to the twenty-first century. For a number of years during the apartheid period, we have data classified by race. The estimates for recent years bear out the picture of South Africa as a highly unequal country, but allow this to be placed in historical and international context. The time series presented here will, we hope, provide the basis for detailed investigation of the impact of South African institutions and policies, past and present. But the similarity of the changes over time in top incomes across the four ex-dominions suggests that national developments have to be seen in the light of common global forces.

We assess income inequality across French and British colonial empires between 1920 and 1960, exploiting for the first time income tax tabulations. As measured by top income shares, inequality was high in colonies. Europeans comprised the bulk of top income earners, and only a minority of autochthons could compete income-wise. Top income shares were no higher in settlement colonies, those territories were wealthier and the average European settler was less rich than the average expatriate. Inequality among autochthons was moderate, and inequality among Europeans was similar to that of the metropoles. The post-WWII fall in income inequality can be explained by the one among Europeans, mirroring that of the metropoles, and does not imply that the European/autochthon income gap was very much reduced. After independence, the mass recruitment of state employees induced a large increase in inequality among autochthons. Dualistic structures lost their racial dimension and changed shape, yet persisted.

Chapter 12 by Facundo Alvaredo, Lydia Assouad and Thomas Piketty is concerned with measuring inequality in the Middle East. Here, the authors reference and combine all income data existing in the region – household surveys, national accounts, income tax data and wealth data – in order to estimate income concentration in the region for the period 1990–2016. According to their benchmark series, the Middle East appears to be the most unequal region in the world, with a top decile income share as large as 64%, compared to 37% in Western Europe, 47% in the US and 55% in Brazil. This is due both to enormous inequality between countries (particularly between oil-rich and population-rich countries) and to large inequality within countries (which is probably under-estimated, given limited access to accurate fiscal data). The authors stress the importance of increasing transparency on income and wealth in the Middle East and hope more research can shed light on the dynamics of income concentration, within-country inequality, as well as the drivers of such extreme levels.

This paper briefly presents the methodology of Distributional National Accounts (DINA), which distributes total national income and total wealth among all individual residents. With DINA, we can estimate inequality statistics and growth by income and wealth groups that are consistent with aggregate growth from National Accounts. This methodology has been recently applied to a number of countries, and the data produced are available from WID.world. The paper summarizes the initial empirical findings. We observe rising top income and wealth shares in nearly all countries in recent decades, but the magnitude of the increase varies substantially, thereby suggesting that different country-specific institutions and policies matter. We combine countries’ statistics to estimate global inequality since 1980. Global inequality has increased since 1980 in spite of the catching up of large emerging countries like China and India. This has been driven by the income growth of top world earners.

This paper briefly presents the methodology of Distributional National Accounts (DINA), which distributes total national income and total wealth among all individual residents. With DINA, we can estimate inequality statistics and growth by income and wealth groups that are consistent with aggregate growth from National Accounts. This methodology has been recently applied to a number of countries, and the data produced are available from WID.world. The paper summarizes the initial empirical findings. We observe rising top income and wealth shares in nearly all countries in recent decades, but the magnitude of the increase varies substantially, thereby suggesting that different country-specific institutions and policies matter. We combine countries’ statistics to estimate global inequality since 1980. Global inequality has increased since 1980 in spite of the catching up of large emerging countries like China and India. This has been driven by the income growth of top world earners.