Working Paper: CEPR ID: DP5214
Authors: Joseph Francois; Hugo Rojas-Romagosa
Abstract: The inequality dataset compiled in the 1990s by the World Bank and extended by the UN has been both widely used and strongly criticized. The criticisms raise questions about conclusions drawn from secondary inequality datasets in general. We develop techniques to deal with national and international comparability problems intrinsic to such datasets. The result is a new dataset of consistent inequality series, allowing us to explore problems of measurement error. In addition, the new data allow us to perform parametric non linear estimation of Lorenz curves from grouped data. This in turn allows us to estimate the entire income distribution, computing alternative inequality indexes and poverty estimates. Finally, we have used our broadly comparable dataset to examine international patterns of inequality and poverty.
Keywords: income distribution; datasets; inequality trends; Lorenz curve estimation; poverty estimation
JEL Codes: C80; D31; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| constructed dataset (Y10) | reduces measurement error in inequality observations (C21) |
| reduces measurement error in inequality observations (C21) | allows for a more accurate estimation of the relationships between income distribution and macroeconomic variables (E16) |
| constructed dataset (Y10) | improves reliability of cross-country comparisons of inequality data (F40) |
| between-country inequality variation (O57) | more significant than within-country variation (F29) |
| country-specific characteristics (O57) | explain inequality levels (I24) |
| significant time trends in inequality (D31) | observed particularly in OECD countries (O57) |
| U-shape pattern in inequality (D31) | indicates a return to higher levels of inequality (P17) |
| decrease in inequality (I14) | observed for most of the analyzed period in developing countries (O54) |
| slight increase in inequality in the 1990s (D31) | observed in developing countries (F63) |