Inequality bands: Seventy-five years of measuring income inequality in Latin America

Income Inequality in Latin America: A Comprehensive Review

Introduction

How much income inequality is there in Latin America? Is inequality today higher or lower than it was in the 1990s, in the aftermath of the debt crisis? Has the evolution of inequality followed a particular pattern?

Debates on inequality levels and trends are rampant, and Latin America is no exception. Drawing on a comprehensive compilation of inequality measures, this report reviews the measurement of income inequality in the region over the last seven decades. The report emphasizes the importance of understanding the different estimates available and the need to analyze the phenomenon of income inequality in Latin America.

Measurement of Income Inequality

Figure 1: Gini coefficients in Latin America and the Caribbean, 1948-2021

• The report presents Gini coefficients, the most frequently used inequality measure, for 18 Latin American countries over a span of 75 years.
• The data is drawn from various sources, including harmonized estimates from household surveys, secondary source estimates, and individual studies.
• The range of inequality estimates is considerable, with variations depending on the country and time period.

How Unequal is Latin America?

The report provides average Gini coefficients for the 2010s based on harmonized databases from comparable surveys. The countries with the highest levels of income inequality are Brazil, Colombia, and Panama, while Uruguay has the lowest level of income inequality.

Evaluation of Inequality Measures

When tax data is used to correct for top incomes misreporting and attempts are made to scale up to national accounts estimates of national income, Gini coefficients are found to be higher on average. However, these methods involve assumptions and decisions that are not easily validated, leading to considerable uncertainty about the exact levels of income inequality in the region.

Evolution of Inequality Measures

The report finds that the evolution of inequality in Latin America follows a broad inverted-U curve, with inequality rising before the 1990s and falling during the early 21st century. However, there are variations in timing and magnitude among different countries.

Conclusion

The report acknowledges the progress made in data collection to measure inequality in Latin America. It also highlights the need for further improvements in data sources and the existence of a relatively robust pattern of inequality dynamics. Researchers are encouraged to explore the drivers and mechanisms behind income inequality in the region.

References

1. Alvaredo, F, F Bourguignon, F Ferreira and N Lustig (2024), “Inequality Bands: Seventy-five years of measuring income inequality in Latin America”, CEPR Discussion Paper 18852.
2. Alvaredo, F, F Bourguignon, F Ferreira and N Lustig, (2023), “Seventy-five years of measuring income inequality in Latin America”, LSE-International Inequalities Institute WP 111.
3. De Rosa, M, I Flores Beale and M Morgan (2022), “More unequal or not as rich? Revisiting the Latin American exception”, Stone Center Working Paper 53.
4. De Rosa, M, N Lustig and V Martinez Pabon (forthcoming), “Fiscal redistribution when accounting for the rich in Latin America”, CEQ Working Paper Series.
5. Ferreira, F and N Lustig (2015), “Appraising cross-national income inequality databases”, Special issue, Journal of Economic Inequality 13.
6. Lopez-Calva, L F and N Lustig (2010), Declining Inequality in Latin America: A Decade of Progress?, Brookings Institution Press.

SDGs, Targets, and Indicators

1. No Poverty

• Target 1.4: Ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property.
• Indicator: Gini coefficients as a measure of income inequality.

2. Zero Hunger

• Target 2.1: By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations, including infants, to safe, nutritious, and sufficient food all year round.
• Indicator: Not mentioned in the article.

5. Gender Equality

• Target 5.1: End all forms of discrimination against all women and girls everywhere.
• Indicator: Not mentioned in the article.

8. Decent Work and Economic Growth

• Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
• Indicator: Not mentioned in the article.

10. Reduced Inequalities

• Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average.
• Indicator: Gini coefficients as a measure of income inequality.

16. Peace, Justice, and Strong Institutions

• Target 16.6: Develop effective, accountable, and transparent institutions at all levels.
• Indicator: Not mentioned in the article.

Table: SDGs, Targets, and Indicators

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Source: cepr.org

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