Income distribution and poverty in Mexico

ncome lD'istribution and Poverty in MezD(c( SWP395 Wovid. Bank Staff Working Paper No. 395 June 1980 y: Joel Bergsman I Country Programs Department I Latin America and the Caribbean Regiona[\Officp 1980 The World Bank .1818 H Street, N.W. Washington, D.C. 20433, U.S.A. The views and interpretations in this document are those of the author and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf.  The views and interpretations in this document are those of the author and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. WORLD BANK Staff Working Paper No. 39 Joint Library Wa;hington, D. C. 20431 July 1980 INCOME DISTRIBUTION AND POVERTY IN MEXICO The recent publication of results from a household budget survey for the first six months of 1977 sheds new light on income distribution in Mexico. This paper reports on analysis of four such surveys, for 1963, 1968, 1975, as well as 1977, with adjustments for consistency and comparability. According to the results, the distribution of income has not changed much since 1963. Thus, although incomes are distributed very unequally in Mexico and poverty is widespread, the absolute income levels of the poorer households have risen more or less apace with those of their richer countrymen, at an annual rate of about 4% per year in real terms. The paper also touches on three important sources of poverty in Mexico, (a) rapid population growth, which has resulted in a high dependency ratio and explosive growth of the labor force; (b) neglect of productivity in a considerable portion of agriculture and the people who live from it; and (c) policies that biased Mexico's economic growth in ways that reduced demand for labor. Analysis of these data continues, both in Mexico and at the World Bank. Special thanks are due to Gabriel Vera, without whose expert guidance and assistance in the analysis this paper could not have been written, and to CENIET and its Director, Geronimo Martinez, for giving us special tabulations of the 1975 survey. Helpful comments from Montek Ahluwalia, Carlos Bazdresch, Surjit Bhalla, Leticia Calzada, David Felix, Ruben Gleason, Salvador Kalifa, Mark Leiserson, Ricardo Moran, Alexander Nowicki, Teresa Rendon, Carmen Sanchez Cordoba, Marcelo Selowsky, Leopoldo Solis, and Richard Webb are also gratefully acknowledged. Thanks also to Ruth MacCrae and Isabelle Wieviorka for their highly competent research assistance. Prepared by: Joel Bergsman Country Programs Department I Latin America and the Caribbean Regional Office, 671-76 Copyright 0 1980 The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A.  Table of Contents Page I. Size Distribution of Income 2 II. Characteristics of the Poor 20 III. Some Causes of Poverty and Inequality 30 IV. Mexican Poverty in Perspective 41 References 45  List of Tables and Charts Table Page No. 1 Basic Data on Size Distribution of Household Income, 1963, 68, 75, and 1977 .4..........*** .........*.. 4 2 Estimates of Disposable Household Income .5 3 Earlier Adjustments for Under-Reporting .6,7 4 Estimates of Decile Distributions of Household Income 13 5 Adjustments for Under-Reporting 14 6 Summary Measures of Income Distribution and Poverty 15 7 Number of "Poor" Families by Sector and Type of Worker: 1975 ..... ............................................. 21 8 Number of "Poor" Families by Sector and by Type of Worker- 1963 * ... ..... ........ .................. 23 9 Sources of Income of "Poor" Families: 1975 ............. 24 10 Number of "Poor" Families by Education of Head of Family: 1975 .... *.......................................... 25 11 Number of "Poor" Families, by Occupation of Head of Family: 1975 ********* *............ .......**........ 27 12 Average Expenditures of "Poor" Families, by Type of Expenditure: 1975 *..........**.*... .... .. 29 13 Patterns of Land Tenure and Production, 1968 .... ........ 38 14 Distribution of Land, Machinery, Value of Holdings, and Value of Production: 1960 ........ . .................... 39 15 Changes in Agricultural Production.Per Farm, 1960-1970 .. 40 Chart 1 International Comparisons of Income Inequality .......... 16  INCOME DISTRIBUTION AND POVERTY IN MEXICO, 1963-1977 Joel Bergsman Introduction Mexico's problems of rapid population growth, low productivity workers and poverty are serious, and there are no quick solutions to them. The relevant data, which come from many different sources, are not always in agreement, and some estimates are difficult to accept. Given more time and access to the original data, it should be possible to put together a more accurate and complete pizture of trends in productivity and income distribution. Researchers at the World Bank and in Mexico are now engaged in this task. But even without the results of such work, the broad outlines of great inequality in productivity and in incomes, and little or no change in distribution over the last 15 years, are unmistakable.  I. SIZE DISTRIBUTION OF INCOME Data and Sources The main sources of data are four generally comparable household budget surveys-,-done in-1963, 1968,_1975 and 1977. These surveys attempted to measure total household income after direct taxes, including income in kind, imputed income from owner-occupied dwellings, income from capital, and transfers, as well as normal monetary income. They are all national sample surveys. Although the concepts, methods, and reliability vary somewhat from one survey to another, they are much more comparable than sets of such surveys in most other LDCs, and at least three of the four appear to be at least as reliable. Moreover, they give direct estimates of the variables that are central to our concern, household income (rather than individual income), and they estimate total after-tax household income, including income in kind and various imputed components such as rent from owner-occupied dwellings. The reported estimates of the size distribution of income and expenditures are shown in Table 1. A comparison between the national total of disposable personal income (DPI) reported in the studies, and the same variable estimated from national income accounts data, is shown in Table 2. Among the interesting charateristics of these data are the following: (i) At lower income levels, reported expenditure is often much greater than reported income. In many cases the differences seem too large to be accepted as true and due to dis-saving by families whose income has fallen below their "permanent" income level.  -3- (ii) The national totals for DPI implied by the household budget studies are considerably less than that implied by national accounts data. Moreover, the difference increases with time--i.e. is smaller in 1963 and 1968 than in 1975 and 1977. These characteristics suggest that income may be underestimated by the studies, and that the degree of underestimation increased in the two more recent studies. If this is so, then neither the situation as of one year nor trends during the period are accurately reflected by the reported data. Under-reporting of income seems to occur in almost all household budget studies in all countries. It is generally thought to be mainly a reflection of two problems: income in kind and informal transfers are thought to be accidentally underestimated, and informants are thought to deliberately under-report. The first problem is presumably concentrated in the lower por- tion of the income spectrum; the second may well occur among informants at all income levels although many scholars believe it to be concentrated (in amount if not in percentage of informants) among those with higher income. Three different sets of adjustments to the reported data for various years are known to the author. Their results are shown in Table 3. Navarrete worked with data for 1950, 1958 and 1963. (Earlier work by the same author is not discussed here, on the assumption that her later publica- tion supercedes the earlier one.) Felix made estimates going back to the nineteenth century, relied on Navarrete for 1950 and 1957, and made his own adjustments for 1963, 1968, and 1975; only the three latest years are dis- cussed here. Altimir made adjustments for 1963 and 1968.  Table 1: BASIC DATA ON SIZE DISTRIBUTION OF HOUSEHOLD INCOME: 1963, 68, 75, and 77 1963 1968 1975 1977 Number of Total Reported Number of T.t-l Rj1p-t-d Number of Total Reported Number of Total Reported Households Income Expenditure Households Income Expenditure Households Income Expenditure Households Income (millions) (million pesos/month) (millions) (million pesos/month) (millions) (million pesos/month) (millions) (million pesos/month) 1.35 290 636 0.69 173 243 1.04 133 213 1.10 625 1.84 806 1,187 0.52 182 247 1.01 493 503 1.10 1,280 1.58 1,231 1,461 0.70 324 399 1.30 1,141 1,153 1.10 1,870 0.80 990 1,138 0.72 438 477 1.02 1,319 1,319 1.10 2,559 1.10 2,309 2,261 1.17 959 1,097 1.03 1,830 1,785 1.10 3,318 0.33 1,218 1,110 0.94 1,035 1,158 0.94 2,120 2,121 1.10 4,140 0.14 729 556 0.92 1,339 1,439 0.95 2,742 2,761 1.10 5,275 0.12 924 692 0.75 1,459 1,577 0.96 3,697 3,668 1.10 6,936 0.06 870 469 0.64 1,636 1,581 1.02 5,766 5,580 1.10 9,895 9,510 0.44 1,514 1,442 0.47 4,107 4,034 0.55 7,261 7.32 9,367 9,510 0.29 1,321 1,155 0.47 9.936 9,297 0.55 14,736 nl.49 4.977 4 033 . _ 8.27 15,321 14,868 10.21 33,284 32,435 11.00 57,895 Sources: Encuesta Sobre Ingresos v Gastos Familiares en Mexico - 1963, Banco de Mexico. Estudio de Ingresos y Gastos de las Familias (1968), Secretaria de la Presidencia, Direccion General Coordinadora de la Programacion Economica y Social, July 1974. Special tabulation from Encuesta de Ingresos v Gastos Familiares (1975), Secretaria del Trabajo y Prevision Social, Centro Nacional de Informacion y Estadisticas del Trabajo, 1977. Special tabulation from the Encuesta Nacional de Ingresos y Gastos de los Hogares,1977, first semester, Direccion General de Estadistica, Secretaria de Programacion y Presupuesto, as reported by Hernandez and Cordoba (1979), Table 1.  Table 2: ESTIMATES OF DISPOSABLE HOUSEHOLD INCOME A. From NLational Income Accounts 1963 1968 1975 1977 . ~~~~~~~~(billion pesos per year) Wages, salaries, social security payments a/ 64.o 117.6 382.4 635.5 Transfers from abroad 0.2 0.4 1.8 3.9 Mixed Income 34.4 43.0 115.2 190.8 Rent and Interest 23.3 38.7 99.5 166.6 Distributed Profits 24.6 48.7 192.4 363.9 less: Direct taxes -6.9 -13.9 -54.2 -116.2 TOTAL 137.1 229.5 716.7 1208.4 B. From Household Budget Studies 112.4 183.8 399.4 694.8 Ratio of "B" to "A" 0.820 0.801 0.557 0.575 Source: Part A Unofficial estimates, Banco de Mexico a/ Includes net factor payments from abroad  Table 3: EARLIER ADJUSTMENTS FOR UNDER-REPORTING NAVARRETE (1970); average monthly incomes in current prices 1950 1958 1963 Percentiles Reported Adjusted Ratio Percentiles Reported Adjusted Ratio Percentiles Reported Adjusted Ratio 0.1- 3.7 50. 129. 2.580 0.1- 7.1 165. 265. 1.606 0.1- 18.4 216. 348. 1.611 3.8- 29.6 113. 182. 1.611 7.2- 22.8 268. 375. 1.399 18.5- 43.5 437. 612. 1.400 29.7- 49.1 175. 245. 1.400 22.9- 34.9 367. 466. 1.270 43.6- 65.1 776. 923. 1.189 49.2- 66.5 250. 318. 1.272 35.0- 47.6 463. 565. 1.220 65.2- 76.0 1240. 1426. 1.150 66.6- 77.4 350. 427. 1.220 47.7- 67.4 626. 739. 1.181 76.1- 91.0 2100. 2264. 1.078 77.5- 88.2 500. 536. 1.072 67.5- 79.8 882. 1127. 1.278 91.1- 95.6 3650. 4597. 1.259 88.3- 95.3 800. 888. 1.110 79.9- 93.8 1438. 1819. 1.265 95.7- 97.5 5202. 8405. 1.616 95.4- 97.7 1250. 1661. 1.329 93.9-100.0 3919. 9515. 2.428 97.6- 99.1 7662. 13130. 1.714 97.8- 99.2 2250. 3433. 1.526 99.2-100.0 13538. 31698. 2.341 99.2-100.0 7636. 13856. 1.815 Total 386 536 1.389 836 1339 1.602 1278 -1777 1.390 Elasticity of adjusment 0.96 1.11 1.08 I FELIX (1979); average annual incomes in 1950 prices 1963 1968 1975 1- 20 1258. 2377. 1.890 1653. 1973. 1.194 861. 2394. 2.780 21-.40 2389. 3257. 1.363 3296. 3488. 1.058 2865. 3806. 1.328 41- 60 3977. 4371. 1.099 5195. 6968. 1.341 4492. 5893. 1.312 61- 80 6896. 8421. 1.221 8886. 11879. 1.337 7576. 9822. 1.296 81- 90 12512. 17502. 1.399 14674. 22166. 1.511 13439. 19484. 1.450 91- 95 19138. 28579. 1.493 26796. 46987. 1.754 21205. 38967. 1.838 96-100 41060. 64610. 1.574 50128. 76984. 1.536 50301. 92514. 1.839 Total 7166 10.241 1.429 9114 13273 1.456 8226 13254 1.611 Elasticity of adjustment 0.99 1.12 0.95 continued,,,  Table 3: Continued I ALTIMIR (1979); average monthly income in current prices Percentiles 1963 1968 1- 10 166. 195. 1.175 259. 216. 0.834 11- 20 281. 302. 1.075 426. 431. 1.012 21- 30 371. 391. 1.054 611. 647 1.059 31- 40 486. 533. 1.097 777. 863. 1.111 41- 50 626. 675. 1.078 1036. 1106. 1.068 51- 60 780. 853. 1.094 1277. 1375. 1.077 61- 70 1010. 1155. 1.144 1573. 1834. 1.166 71- 80 1457. 1795. 1.232 2017. 2723. 1.350 81- 90 2211. 3199. 1.447 3127. 4449. 1.423 91-100 5393. 8672. 1.608 7402. 13321. 1.800 Total 1278 1777 1.390 1850 2696 1.457 Elasticity of adjustment 1.11 1.21 : Author's calculations based on Tables 5, 6 & 7 of Navarrete (70), Table A-VI of Felix (79), and Tables 1 and 14 of Altimir (79).  -8- All three scholars relied on estimates from the national accounts for the total amount of household income in each year (Altimir not completely, as explained below), and hence for estimates of changes over time in the totals. Even here, however, they differ to some extent because disposable household income is not reported in the national income accounts and was estimated differently by each author. But their major differences lie in how the shortfalls were distributed across income classes. Navarrete made a two-step adjustment. (See Navarrete, 1970, and Altimir, 1979, for full explanations.) She first increased the reported income of those classes that reported net dis-saving-by the class as a whole, to take into account presumed under-reporting of income in kind, gifts, transfers, and sporadic income. She then increased the reported income of those classes that reported net saving. The total of this second increase was such as to equate the total over all households with her estimate from the national income accounts, and it was distributed proportionally to the average income of each class so adjusted. As Felix and Altimir have pointed out, this distribution is not only arbitrary in concept, but also depends on the structure of disaggregation in the reported data. Given the way in which the results were originally reported, the adjustment distributes very large shares of the total discrepancy to the highest income classes because, since they covered only a small part of the very top of the distribution, they had very high average incomes. Felix also made a two-step adjustment, conceptually similar to Navarrete's. First he raised the income of the lowest 20% to 90% of its reported consumption and that of the second 20% to 92% of its reported  -9- consumption. The second step was to allocate the remaining gap between the (partly adjusted) survey totals and the national income accounts totals to the upper 60% of all households. Felix followed Navarrete in distribut- ing the total proportionately to the average income of each income bracket. Felix notes that this adjustment is arbitrary, and that it implies an in- come elasticity of under-reporting greater than one (because the number of households in each bracket decreases as the average income increases).l/ Altimir takes a different approach. After detailed and careful analysis of what the various causes of the gaps may be, and of how Navarrete and Felix approached the problem, he concludes that the best method is to adjust separately each component of income: wages and salaries, business income, income from capital, and transfers. But because he did not have access to all the necessary data, he disaggregates families by socio-economic class and income size class. The correction factor for each group is a weighted average of ratios of income as estimated by the national accounts to income as estimated in the survey, and the weights are the incomes of the given type for that group, as estimated in the survey. For income from property, the discrepancy was distributed only to the top 20% of all households. For income from wages and salaries, the survey estimates exceeded the national account estimates and no adjustment was made. For other types of incomes, the discrepancy was distributed proportionally to income as estimated by the surveys. In the judgment of the present author, the methods of Navarrete and Felix (which conceptually are the same and in practice are rather similar) are not acceptable. Their more serious weakness is the totally 1/ "Income elasticity of under-reporting" is the slope of a log-linear regression of adjusted income on reported income.  - 10 - arbitrary nature of the adjustment at the upper end. This adjustment depends not only on arbitrary assumptions about under-reporting (which are unavoid- able) but also on the particular grouping by income size class (which is not unavoidable and which, as used, assigns almost all the discrepancy to the highest classes). Another aspect that seems hard to justify is the assump- tion that only low-income and high-income households under-report, while middle-income households report accurately and honestly. I see no reason to assume that middle-income families are especially accurate in their estimates of their income or especially honest in their reporting of it. Comparisons of reported income and reported consumption in the micro data, reported by Altimir, suggest under-reporting at all income levels. Altimir's logic and method seem far superior; however, his results seem dubious in two respects: for the lowest decile in 1968 his adjustments seem to have reduced the average income,l/ and in general the overall income elas- ticity of under-reporting implied by his results is rather high, especially in 1968 (see Table 3). In deciding how to deal with the adjustment question, I was guided by the following ideas: (i) Some adjustment seems to be required. Inter-year comparisons based on unadjusted survey results would be strongly biased (showing more of a downward trend in incomes than is likely to have occurred); even in one year it seems clear that the reported survey results miss a lot of income. l/ This result is, I think, logically impossible. It may be caused by a mistake in Altimir's calculations, in the typing of his paper, or in my calculations based on his work.  - 11 - (ii) In the absence of new information about under-reporting, any adjustment is arbitrary. Navarrete, Felix and Altimir agree. (iii) I have access only to the published results, plus a few special tabulations for 1975. Hence I could not hope to do as well as Altimir has done for 1963 and 1968, nor anything as good for 1975 and 1977. In this quandary I have opted for simplicity and conservatism. I do not even attempt to estimate "the" distributions, but rather make two sets of estimates for each year, one tending to overestimate inequality and the other tending to underestimate it, with the idea that the truth is pro- bably somewhere in between. Each estimate adjusts total income to the level implied by the national accounts; the "low inequality" estimate, called method 1, assumes an income elasticity of under-reporting equal to 0.95 while the "high inequality" estimate, called method 2, uses a value of 1.20. The two elasticities more or less span the range of those implied in the Navarrete, Felix, and Altimir adjustments. (In method 2, straightforward application of the elasticity of 1.20 results in reducing the average incomes of the lower-income groups; in such cases the added restriction that adjusted income be at least as great as reported income for each class was applied; therefore, in the final results the overall elasticity of under-reporting turns out to be less than 1.20.) In my estimates, reported in Table 4, the first step was to esti- mate decile distributions from the reported data for 1963, 1968, and 1975. (For 1977 the decile distribution was reported.) This was done by inter- polating log-linearly, for each decile point on the cumulative distributions,  - 12 - between the two reported points on either side of the decile point. (For 1963, the first reported point is above the first decile, and hence a rough approximation was made by freehand drawing of a graph.) The piece-wise log-linear interpolation seems to match the shape of the theoretical Pareto curve fairly well, while also being simple to do and giving minimal diver- gence from actual observations.-' (We had two different groupings from the 1975 survey. We used log-linear interpolation from one to estimate the other, and the results were very close to the actuals.) The second step was to apply the two different assumed elasticities of under-reporting to the estimated decile distributions. The results are presented in Tables 4, 5, and 6. The results of the 1975 survey--both before and after adjustments-- seem strange. They imply sharp drops in the shares of the lower income classes, even in their absolute income levels (see Tables 4 and 6). All three measures of inequality jump sharply from the 1968 levels. Then, the 1977 results imply a rapid restoration to a distribution similar to that of 1968. Under adjustment method 2 the real income of the lowest 40% drops 15% from the 1968 level, then rises 49% in the two years to 1977. The share of the lowest 20%, a less reliable measure, shows even more drastic and unlikely behavior under both adjustment methods, dropping between 27% and 46% from 1968 to 1975 and then rising between 82% and 97% from 1975 to 1977. These 1/ Note that in Kalifa's estimates, reported in Kalifa (1977) and in Hernandez and Cordoba (1979) a linear interpolation was used. Not only does this method give a less smooth Lorenz curve, in a few cases it results in identical estimates for average household income in two adjacent deciles, which is nonsense.  - 13 - Table 4: ESTIMATES OF DECILE DISTRIBUTIONS OF HOUSEHOLD INODME Percent of income Cumulative percent of income Decile 1963 1968 1975 1977 1963 1968 1975 1977 A. Unadjusted a/ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~a . 1 1.3T/ 1.2 0.4 1.1 1.3 1.2 0.4 1.1 .2 2.2- 2.2 1.5 2.2 3.5 3.4 1.9 3.3 3 3.1 3.1 2.5 3.2 6.6 6.4 4.4 6.75 4 3.7 4.1 3.7 4.4 10.3 10.5 8.1 10.9 5 4.9 5.1 5.0 5.7 15.2 15.6 13.1 16.7 6 6.1 6.5 6.5 7.2 21.3 22.1 19.7 23.8 7 8.0 8.3 8.5 9.1 29.3 30.4 28.1 32.9 8 11.8 11.3 11.5 12.0 41.1 41.7 39.6 44.9 9 17.0 16.2 16.9 17.1 58.1 57.9 56.4 62.0 10 41.9 42.1 43.6 37.0 100.0 100.0 100.0 100.0 B. Adjustment method l Income elasticity of under-reporting = 0.95 1 1.5 1.3 0.5 1.2 1.5 1.3 0.5 1.2 2 2.5 2.4 1.7 2.4 3.9 3.8 2.1 3.7 3 3.3 3.3 2.8 3.5 7.3 7.1 4.9 7.2 4 4.0 4.4 4.0 4.7 11.2 11.4 8.9 11.9 5 5.2 5.4 5.4 6.0 16.4 16.9 14.2 17.9 6 6.4 6.8 6.9 7.4 22.9 23.6 21.1 25.3 7 8.3 8.6 8.8 9.3 31.1 32.2 29.9 34.6 8 12.0 11.5 11.7 12.1 43.2 43.7 41.6 46.8 9 16.9 16.2 16.9 17.0 60.1 59.9 58.4 63.7 10 39.9 40.1 41.6 36.3 100.0 100.0 100.0 100.0 C. Adjustment method 2: Income elasticity of under-reporting = 1.20 1 1.1 1.0 0.2 0.6 1.1 1.0 0.2 0.7 2 1.8 1.7 0.9 1.5 2.9 2.7 1.1 2.1 3 2.5 2.5 1.7 2.3 5.4 5.1 2.8 4.4 4 3.0 3.3 2.6 3.4 8.4 8.4 5.4 7.8 5 4.0 4.1 3.9 4.6 12.4 12.5 9.3 12.5 6 5.0 5.2 5.3 6.1 17.5 17.7 14.6 18.5 7 6.7 7.0 7.2 8.1 24.2 24.8 21.8 26.6 8 10.7 10.2 10.4 11.3 34.8 35.0 32.1 37.9 9 16.5 15.7 16.5 17.2 51.3 50.6 48.6 55.1 10 48.7 49.4 51.4 44.9 100.0 100.0 100.0 100.0 Source: Author's estimates from household budget surveys.- Details may nof add to totals because of rounding. a/ Approximate  Table 5: ADJUSTMENTS FOR UNDER-REPORTING (average monthly incomes in current prices) Adjustment Method 1 Adjustment Method 2 ted [ Adtustment Method 1 Adjustment Method 2 Decile Reported | Adjusted Ratio | Adjusted Ratio Reor | Adjusted Ratio | Adjusted Ratio 1963 1968 1 122 168 1.383 122 1.000 181 257 1.422 181 1.000 2 209 281 1.346 209 1.000 334 461 1.379 334 1.000 3 288 381 1.325 288 1.000 469 636 1.356 469 1.000 4 345 453 1.313 345 1.000 625 835 1.336 625 1.000 5 458 593 1.294 458 1.000 784 1,036 1.321 784 1.000 6 575 736 1.280 575 1.000 991 1,295. 1.306 997 1.006 7 749 946 1.263 763 1.018 1,272 1,640 1.290 1,345 1.058 8 1,107 1,371 1.238 1,219 1.101 1,734 2,202 1.270 1,952 1.125 9 1,592 1,935 1.216 1,884 1.184 2,476 3,088. 1.247 2,992 1.208 10 3,923 4,560 1.162 5,563 1.418 6,455 7,675 1.189 9,447 1.464 9,367 11,425 1.220 11,425 1.220 15,321 19,125 1.248 19,125 1.248 Elasticity of adjustment 0.95 1.10 0.95 1.11 1975 1977 1 127 275 2.170 127 1.000 625 1,241 1.984 631 1.009 2 496 1,005 2.027 535 1.078 1,280 2,450 1.914 1,490 1.164 3 845 1,669 1.974 1,014 1.199 1,870 3,513 1.878 2,349 - 1.256 4 1,218 2,361 1.938 1,572 1.290 2,559 4,732 1.849 3,422 1.337 5 1,674 3,193 1.907 2,302 1.375 3,318 6,056 1.825 4,673 1.408 6 2,180 4,104 1.882 3,160 1.450 4,140 7,473 1.805 6,095 1.472 7 2,816 5,233 1.858 4,296 1.526 5,275 9,407 1.783 8,151 1.545 8 3,814 6,982 1.830 6,184 1.621 6,936 12,202 1.759 11,322 1.632 9 5,615 10,081 1.795 9,835 1.752 9,895 17,101 1.728 17,341 1.753 10 14,498 24,824 1.712 30,700 2.118 21,996 36,526 - 1.661 45,226 2.056 33,284 59,725 1.794 59,725 1.794 57,900 100,700 1.739 100,700 1.739 Elasticity of adjustment 0.95 1.17 0.95 1.20 Source: Author's estimated from household budget surveys.  Table 6: SUMMARY MEASURES OF INCOME DISTRIBUTION AND POVERTY 1963 1968 1975 1977 1963 1968 1975 1977 1963 1968 1975 1977 A. Unadjusted B. Adjustment Method 1: C. Adjustment Method 2: Income Elasticity of Under-Reporting = 0.95 Income Elasticity of Under-Reporting = 1.20 Percent of Disposable Household Income Received by: Lowest 40 percent 10.3% 10.5% 8.1% 10.9% 11.2% 11.4% 8.9% 11.9% 8.4% 8.4% 5.4% 7.9% 41-80 percent 30.8 31.2 31.5 34.0 31.9 32.3 32.7 34.9 26.4 26.6 26.7 30.0 Highest 20 percent 58.9 58.3 60.4 55.1 56.9 56.3 58.4 53.2 65.2 65.0 67.9 62.1 Measures of Inequaliry': Share of Highest 20 percent 16.8 17.1 31.8 16.7 14.6 14.8 27.8 14.4 22.5 24.1 61.7 29.6 /share of lowest 20 percent Gini index a/ .527 .522 .557 .496 .505 .500 .537 .476 .584 .584 .628 .569 Theil index a/ .494 .488 .556 .426 .450 .444 .511 .389 .636 .642 .738' .582 Households with Real Incomes Less Than 1977 Minimum Wage: Number of households (millions) 4.2 3.7 4.8 4.4 3.3 2.5 3.9 2.1 4.2 3.6 3.9 3.4 Percent of all households 57.1 44.7 47.2 39.6 45.2 30.2 38.1 19.0 57.2 43.0 38.6 30.3 Average Real Income of Lowest 40 $565 $742 $523 $757 $753 $1009 $1034 $1426 $565 $742 $633 $944 percent (1977 dollars per year per household) Source: Author's estimates from household budget surveys. a/ calculated from decile distributions.  SHARE OF LOWEST 40 PERCENT ~~~~~~0 0 TAIWAN SRI LANKA . I YUGOSLAVIA INDIA KOREA . 4 SPAIN ARGENTINA . CHILE i COSTA RICA PHILIPPINES MEXICO PREDICTED TURKEY ._._| MALAYSIA 5_._I_._! VENEZUELA HONDURAS PERU| _ BRAZI L . , m m m 0~ z > 0 >I a -4 N) > m