Measuring True Income Inequality in Mexico

Recent literature on income distribution in Mexico has found evidence of underestimation in inequality. There is a growing consensus that household surveys in Mexico do not capture total household income, but there is no... [ view full abstract ]

Recent literature on income distribution in Mexico has found evidence of underestimation in inequality. There is a growing consensus that household surveys in Mexico do not capture total household income, but there is no consensus on a methodological proposal to estimate a more-realistic distribution. This article offers a proposal for adjusting household income, crossing information from household surveys, national accounts, economic censuses, and tax incidence from the Tax Administration System. It shows evidence of a high, persistent income-distribution inequality, with emphasis on factorial and intracompany inequality. The usual adjustment implies that entire average income increases, but this article identifies the main cause of underestimation in distribution, focusing on noncaptured capital income in the wealthiest households surveyed