Abstract

Building on the two-class income model (Banerjee and Yakovenko, 2010), this paper proposes a new methodology to estimate the income distribution that accounts for hidden sources of income, such as retained earnings. We promote and illustrate this methodology with a case study of the Chilean economy. Our results reveal that after including the hidden sources of income, economic inequality in Chile has remained relatively constant over the last 15 years. (c) 2020 Elsevier B.V. All rights reserved.