Declining inequality in Latin America? Robustness checks for Peru

Diego Winkelried and Bruno Escobar

MPRA Paper from University Library of Munich, Germany

Abstract: Household surveys underreport incomes from the upper tail of the distribution, affecting our assessment about inequality. This paper offers a tractable simulation method to deal with this situation in the absence of extra information (e.g., tax records). The core of the method is to draw pseudodata from a mixture between the income empirical distribution and a parametric model for the upper tail, that aggregate to a preestablished top income share. We illustrate the procedure using Peruvian surveys that, as in the rest of Latin America, have displayed a sustained decrease in the Gini index since the 2000s. In a number of experiments, we impose a larger top income share than the one observed in the data, closer to corrected estimates for less egalitarian neighbors (e.g., Chile). We find that even though the point estimates of the Gini index are biased indeed, the corrected indices still decrease in time.

Keywords: Top income share; income inequality; Latin America (search for similar items in EconPapers)
JEL-codes: D63 F63 N36 O54 (search for similar items in EconPapers)
Date: 2020-12-16
New Economics Papers: this item is included in nep-his
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Citations: View citations in EconPapers (1)

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Journal Article: Declining inequality in Latin America? Robustness checks for Peru (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:106566

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