economies.<sup>4</sup> The information from PovcalNet is combined with the World Development Indicators (WDI), which is the World Bank’s principal collection of development indicators compiled from officially recognized international sources.

For the micro-analysis, disposable household income data was drawn from the Luxembourg Income Study (LIS).<sup>5</sup> Spanning five decades, the LIS is the largest available income database of harmonized microdata collected from about 50 countries around the world.<sup>6</sup> The countries’ data sets are harmonized into a common framework and contain household- and person-level data on labor income, capital income, pensions, public social benefits (excluding pensions) and private transfers, as well as taxes and contributions, demography, employment, and expenditures. Sixteen countries were selected (four developing and twelve developed countries), which were considered to be representative of the groups outlined in the introduction, notably<sup>7</sup> : India (2011) for the group South Asia and MENA; Brazil (2013), Chile (2013), and Uruguay (2013) for the LAC group; Belgium (2013), France (2010), Italy (2014), Greece (2013), and Spain (2013) for the EuroMediterranean cluster; the United Kingdom (2013), Ireland (2014) and the Netherlands (2013) for the Northern European non-social democratic group; and, finally, Sweden (2005), Denmark (2013), Finland (2013) and Norway (2013) for the social-democratic Northern Europe group, i.e. the Scandinavians.

As mentioned before, we also conducted a preliminary analysis on a group of MENA countries that was not included in the LIS data set, e.g. Morocco, Jordan and Egypt.<sup>8</sup> The comparison with

> 4 We follow the most recent (2020) World Bank classification that uses the Atlas method to estimate the size of economies in terms of gross national income (GNI) per capita: Low income below US$1,036; Lower-middle income between US$ 1,036 and US$4,045; Upper-middle income between US$4,046 and US$12,535; and High income above US$12,535.

> 5 “Disposable household income” is usually the preferred measure for income distribution analysis, as it is the income available to households to support their consumption expenditure and savings during the reference period (Canberra Group, 2011). According to the LIS documentation (https://www.lisdatacenter.org/data-access/key- <u>figures/methods/disposable/), this measure includes income received from work, wealth, and from direct government</u> benefits, such as retirement or unemployment benefits. The measure then subtracts direct taxes paid, such as income taxes. The definition does not include sales taxes or non-cash benefits, such as government or employer provided health care. The income definition also does not include income from capital gains, a significant source of non-salary income for many wealthy individuals. As a result, many top incomes are probably underestimated.

> 6 The publicly accessible country data sets are listed on the LIS website at: <u>https://www.lisdatacenter.org/our-data/lisdatabase/. To preserve confidentiality, access to the micro-data is remote, meaning that the program code is sent to</u> LIS rather than being run by the user directly on the data.

> 7 The figures in parentheses indicate the year of the survey.

8 Egypt is included in LIS but does not have the female wage variable. In order to keep the comparability with other MENA countries, we decided to use the data for Egypt included in Povcalnet.

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