Top income contribution for income inequality in Brazil

Abstract

The share of the income inequality explained by the 10% richest members of the Brazilian population is higher than 50%. This percentage is higher in Brazil than what is found for the United States (45%), Germany (44%) and Great Britain (41%). Inequality was measured using an index which is still not much used in the socioeconomic literature, the J-divergence. It can be defined as the sum of Theil’s T and L indices, but unlike these and the Gini index, the J-divergence of a population and its corresponding sample estimates can be easily decomposed as the sum of the individual contributions to the total inequality. Publicly available microdata on equivalised and per capita household total monthly income from the Brazilian National Household Sample Survey (Pnad) were used to estimate the J-divergence for each year from 1981 to 2015, and the corresponding shares of the inequality explained by each twentieth of the income distribution. In the period 2001-2014 of reduction of inequality in Pnad, the central group of the distribution reduces its share in J-divergence. By integrating Pnad and Income Tax data for 2014, more than 50% of the resulting inequality of adult personal income is driven by the richest hundredth.