SEDLAC), as well as observations from East Asia and Africa (from the World Bank sources). Altogether, we assembled 315 surveys that follow the LIS income definitions.

Across the enlarged data set, the average number of observations per country is more than 6, and there are multiple observations for all countries but Greece, Slovenia and the Republic of Korea. Brazil and Argentina have, respectively, 23 and 18 observations. Observations are as early as 1967 and as late as 2007; 81 percent of the observations are from 1990 or later (See Annex Table A1 for a list of countries and years covered).

# Calculating redistribution

We use these data to calculate market, gross and disposable income. To ensure comparability of the incomes data in the World Bank and LIS surveys, market income for households in the World Bank surveys was calculated using LIS definitions. World Bank surveys in which these definitions could not be applied were discarded. Market incomes consist of household earnings before direct government taxes and transfers. Government fiscal policy leads to redistribution to the extent that the combination of direct government taxes and transfers increases the incomes of households with lower market incomes and reduces the incomes of households with larger market incomes.

Ideally, we would compare market and disposable incomes, since disposable income is market income plus all direct government transfers received by the household, less all direct taxes paid by the household.<sup>8</sup> This is almost always possible (and meaningful) for rich countries, but not for other counties. In most of Latin America, direct taxes largely take the form of wage taxes that are withdrawn at the source; survey respondents thus report their incomes net of these taxes and do not indicate how high these taxes are. Other direct taxes are negligible. This means that disposable and gross incomes reported for Latin America are essentially the same, but that we are unable to account for the effect of direct taxes separately. We therefore measure redistribution simply by examining the difference between market income and gross income, i.e., accounting for the effect of transfers only. The next section shows that results are likely to be insensitive to this data-driven choice.

To measure redistribution, we first sort households into ten deciles according to their _market_ income. To calculate _gross_ incomes of the households in each _market_ decile, government transfers are added to the market income of each decile. Redistribution is large when the gross incomes of those in the lower deciles of market income are significantly higher than their market incomes and the gross incomes of those in the higher market deciles are not. That is, redistribution is large when those with lower shares of market incomes “gain” (have higher shares of gross income), and those with higher market income shares “lose” (have lower gross income shares).

The difference between a decile’s share of total disposable income and the same decile’s share of total market income (recalling that the deciles are defined according to their market

> 8 The LIS definitions that we use are as follows: Market income (MI), _brutto_ market income = _brutto_ earnings (inclusive of wage taxes) +  income from self-employment + cash property income + occupational pensions.  MarketP income (MI1) = Market income + social retirement benefits. Gross income = _brutto_ market income + all social transfers + regular private transfers (state mandated alimony and others private transfers). Disposable income = Gross income - mandatory payroll tax - income taxes. For non-LIS (mostly Latin America) countries, our definitions are: Market income (MI), _net_ market income = net earnings +   income from self-employment + cash property income. Market P income (MI1), _net_ market P income = Market income + social retirement benefits. Gross income = _net_ market P income +  nonretirement  social transfers + private transfers. Disposable income = gross income.  (We use the term "brutto" here to differentiate between the situation when wage taxes are included as part of wages from the term of "gross" income that is used by LIS and more generally in work on household surveys.)

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