Was falling inequality in all Latin American countries a data-driven illusion? Income distribution and mobility patterns in Uruguay 2009-2016

Although many studies based on household surveys indicate that over the last two decades income inequality decreased in most Latin American countries, income tax records estimations for specific countries suggest that top incomes shares remained steady or even increased. To contribute to the current debate, we provide evidence for Uruguay on primary income distribution among income receivers in the time-span 2009-2016 and assess income dynamics along the income distribution. Our research is based on household surveys micro-data and a unique array of longitudinal matched personal-firm income tax micro-data that covers around 75% of the adult population. Our findings suggest that inequality trends are sensitive to the data source and inequality measure. Pre and post-tax Gini and Theil indices decreased, with a milder fall in tax records than in harmonized household surveys. However, reduction patterns were different the two data-sets: whereas in tax records synthetic indices fell within the bottom 99% offsetting increased concentration at the top, household survey estimations indicate that the largest inequality reduction occurred at the top. In turn, while falling in harmonized household surveys throughout the whole period, tax records based estimates of top 1% income share remained steady around 15% in 2009-2014 and grew afterwards. We also investigate income dynamics, showing that positions were very stable with average persistence rates at the top 1% close to 80%. Interestingly, persistence rates were slightly lower in the period of decreasing inequality. Finally, we highlight that, in the time-span considered, income mobility had a very modest equalizing effect.