Inequality Within Countries is Falling: Underreporting-Robust Estimates of World Poverty, Inequality and the Global Distribution of Income

Maxim Pinkovskiy, Xavier Sala-i-Martin, Kasey Chatterji-Len and William H. Nober

No 32203, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Household surveys suffer from persistent and growing underreporting. We propose a novel procedure to adjust reported survey incomes for underreporting by estimating a model of misreporting whose main parameter of interest is the elasticity of regional national accounts income to regional survey income, which is closely related to the elasticity of underreporting with respect to income. We find this elasticity to be substantial but roughly constant over time, implying a large but relatively constant correction to survey-derived inequality estimates. Underreporting of income by the bottom 50% of the world income distribution has become particularly important in recent decades. We reconfirm the findings of the literature that global poverty and inequality have declined dramatically between 1980 and 2019. Finally, we find that within-country inequality is falling on average, and has been largely constant since the 1990s.

JEL-codes: C83 D31 D33 (search for similar items in EconPapers)
Date: 2024-03
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Working Paper: Inequality Within Countries is Falling: Underreporting Robust Estimates of World Poverty, Inequality, and the Global Distribution of Income (2024)
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