Saki Bigio: “I think we are very far from being one of the most unequal countries in the world”

On Monday, February 6, La República published the report “Peru is the fourth most unequal country in the world”, according to the Latinometrics analysis based on the 2022 Global Inequality Report. Various voices spoke out, some specialists questioned the methodology for make a statement that has gained greater notoriety in this context of social upheaval. One of those voices was that of the Peruvian economist Saki Bigio who lives in Los Angeles, United States. We talked with him and he gave us more details about his position. In addition, we interviewed Ernesto Canalesco-founder of Latinometrics, whose version will be published this Friday.

— Is Peru one of the most unequal countries in the world?

– I don’t think so. We are far from being one of the most unequal countries, I would say that we are a little above the average for Latin America and a lot is going to depend on exactly which measure is used. There are 33 million Peruvians, so there are many ways to measure inequality. Depending on how it is measured, We are going to be a little better than the average, in some cases a little worse, but we are very far from being one of the most unequal countries.

— Latinometrics does an analysis of the data used for the Global Inequality Report 2022 and you question these conclusions.

— Yes. There are two variables on which we are interested in measuring inequality. One is about income inequality, the other is about wealth. For example, income is what you can earn this year, wealth is what you have saved between the bank, companies or your own home. You can have a very low income one year, but you can have a house that is worth a lot and you decided to lend it to a brother. In the Peruvian case, we do not have wealth data directly. We have data on income, we do measure that well. So, that data has to be reconstructed in various ways. That is where the problem comes from. The authors of the paper are very famous people and have become famous for measuring wealth inequality in developed countries, for which there is data. And the sources of these data are usually inheritance taxes or wealth taxes, mainly. Since for many countries they do not have data on wealth, what they do is try to extrapolate from income to wealth.

— Latinometrics points out that the 1% of the richest population in Peru holds 28% of the income of the entire country. They talk about income, not wealth.

— Yes. This is the data for Peru [al 2021, es 28%] and this is the average for Latin America [23%]. Notice how the series fluctuates and how it moves up and down the Latin American average. For example, for the year 2019 we are below the Latin American average [Perú 20% y AL 22%] and from there it goes up to 2021. So, it is a series that has something strange in terms of volatility. They do not have wealth data, but infer it through income. Even this 1% I don’t know exactly how they build it. (…) And the reason why I am very suspicious is that there are other data that are much more robust than what the INEI does publish, through the National Household Survey (Enaho). So that gives us a good snapshot of what is happening in wealth. (…) Or the Gini index, which is another way of measuring inequality.

— So Latinometrics draws a wrong conclusion. Does that mean to us?

– Yes Yes. The ranking is not reliable, the same authors of the [informe] they say. But it does not seem to me that the methodology is clear, it is not transparent. It doesn’t tell you this data is from Peru that we got from Peruvian sources and that’s how we built it. They don’t put it

— Does the absence of these data make the inequality analysis unfeasible? I ask why, for some people, to question this study, which is so deep, global, is like denying the existence of inequality in the country, at least in this context one has that reading.

– No, that’s not true. I am simply saying that the measure is wrong. The only thing I see is that this data is not the data to look at, that there are many other sources. Starting with the INEI, and even if one obtains a permit from Sunat, with this information, at least, one can measure the inequality at the level of people who are formal and who pay taxes.

— You consider that the Gini coefficient is more reliable, but you know that it is also highly questioned. For example, there is a study called “Wealth and inequality in Peru (2019)”, in which they point out that the information on which this coefficient is based is limited.

— The problem with the Gini coefficient is that, since the data comes from surveys, it does not capture the groups More rich. I mean, there may be a problem with that top 1%. We don’t have access to that top 1%.

— And don’t you think that makes it biased information?

— No, it is not biased information, it is the information that is there. biased it’s not.

— But if you don’t have information about the entire universe, what could you call that?

— But this other source [el informe] nor does it have the complete universe.

— Based on your experience with this type of data, do you think there is an imbalance in the distribution of wealth in Peru?

— I would say that we could improve it a lot, yes.

— But what data do we rely on to improve?

— We can base ourselves on the same Gini coefficient, that is, we would like to have the Gini coefficient that has Spain or what do you have USA, at least. what do you have Italy or countries that we consider more equal visually, right? when we visit them.

— Should the rich in Peru pay more taxes?

I think so, I think we can raise marginal taxes.