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CEQ Working Paper No 21: Inequality and top incomes in Uruguay: a comparison between household surveys and income tax micro-data


Inequality and top incomes in Uruguay: a comparison between household surveys and income tax micro-data
Working Paper No. 21

A working document by:
Gabriel Burdín
Fernando Esponda
Andrea Vigorito

Abstract
After increasing over more than a decade, recent studies based on household surveys data show that income inequality in Uruguay started to decline in 2008. In this study we assess whether this trend is robust to the use of novel micro-data from the recently restored Uruguayan personal income tax for the years 2009-2011. We analyze primary income and pensions and carry out to main comparative exercises. In the first part of the paper, we adjust household surveys to make them comparable to tax records. After that, we follow the methodology proposed by Atkinson et al (2011) and Alvaredo (2011) to compute top income shares and corrected inequality measures. We also investigate the redistributive effect of the personal income tax burden in the two data sets. Inequality indexes depict a similar trend in inequality reduction, even though the decrease is less sharp in tax records than in harmonized household surveys. According to our estimations from income tax data, the share of the top 1% did not decline in this period, and was situated around 14%. Household survey data underestimate the share of the top 1% in total income by approximately 3 p.p. and depict an opposite trend in the top shares evolution throughout the period compared to the one observed in income tax micro-data. This result might be revealing an increasing difficulty of ECH for capturing very high incomes. Finally, personal income tax in Uruguay redistributes roughly 2 p.p. of the Gini index. Effective tax rates exhibit a progressive pattern in the case of total income, labour income and pensions, whereas they are slightly regressive when considering capital income.

Access the working document here:
Updated May 2014
CEQ Working Paper No 21: Inequality and top incomes in Uruguay: a comparison between household surveys and income tax micro-data

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Join us every Wednesday at 10:30 am for a bilingual storytime for kids ages 2 – 10. The program is part of an initiative between Tulane University’s Stone Center for Latin American Studies and the New Orleans Public Library called the Pebbles Center. This summer we will explore the environment and diverse geography of Latin America. Bring your favorite jungle animal and be prepared to learn some Spanish as we embark on an adventure through the Americas. This program provides a reading list of recommended titles for all ages to explore Latin America on your own this summer. If you read all books, you will be eligible for a special award offered during Hispanic Heritage month at the annual Celebración Latina held at the Audubon Zoo.

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