Facundo Alvaredo

This paper examines the estimation of the distribution of wealth using estates left at death. We establish formal conditions for implementing a simplified version of the classic estate multiplier method, relying solely on minimal information about estates and mortality. These conditions are empirically validated, and the simplified approach is applied to produce new long-run top wealth share series for Belgium, Japan, and South Africa, where estate data have previously been underutilized. This method holds potential for expanding the range of countries and years in which wealth concentration can be estimated, especially where estate data exist but the standard method with heterogeneous multipliers is inapplicable.

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.

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. Although the evidence from the first quarter century – roughly until the 1970s – is too fragmentary and difficult to compare, clearer patterns emerge for the last fifty years. The central feature of these patterns is a broad inverted U curve, with inequality rising in most countries prior to the 1990s, and falling during the early 21st Century, at least until the mid-2010s, when trends appear to diverge across countries. This broad pattern is modified by country specificities, with considerable variation in timing and magnitude. Whereas this broad picture emerges for the dynamics, there is much more uncertainty about the exact levels of inequality in the region. The uncertainty arises from the disparity in estimates for the same country/year combinations, depending on whether they come from household surveys exclusively; from some combination of surveys and administrative tax data; and on whether they attempt to scale income aggregates to achieve consistency with National Accounts estimates. Since no single method 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.