Income concentration in Latin American Banking: A multidimensional analysis based on Pareto
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Abstract
INTRODUCTION. The concentration of banks’ operating income is a key indicator for characterizing how income is distributed among financial institutions. OBJECTIVE. To assess the applicability of the Pareto principle by examining the concentration of banks’ operating income in eleven Latin American countries (2020–2024) and comparing the results with other methodologies. METHOD. Using official data, we estimated the share of income captured by the top 20% of banks, Lorenz curves, the slope of the 80th–100th percentile of the CDF, the Gini coefficient, the Herfindahl-Hirschman Index, and the shape parameter ξ. RESULTS. Overall, Latin American banking exhibits a pattern consistent with the Pareto 80/20 rule: Brazil appears as the most concentrated system, followed by Mexico and Argentina. In contrast, Uruguay and Chile show, on average, the lowest levels according to the evaluated indicators. DISCUSSION AND CONCLUSIONS. Concentration is multidimensional: the HHI summarizes concentration of operating-income shares, the Gini coefficient summarizes overall income inequality, and the ξ parameter better captures extreme dominance in the upper tail. Because these metrics can yield different rankings, a complementary approach is recommended to comprehensively assess banking-sector concentration.
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