EDUCATION OR INFLATION?: THE MICRO AND MACROECONOMICS OF THE BRAZILIAN INCOME DISTRIBUTION DURING 1981-1995
FERREIRA,FRANCISCO H. G.
This paper investigates the increases in inequality observed in Brazil during the 1980s, as well as the declines in the first half of the 1990s. It also documents the more cyclical trends in poverty during the same period. Using static decompositions of inequality by household characteristics, it quantifies the importance of education, race, geographic location and demographic structure of the household as determinants of inequality levels. Decomposing inequality by factor components reveals that almost half of overall inequality is due to the distribution of self-employment incomes. The causes of changes in inequality differ across the two decades. The rise in inequality in the 1980s appears to have been driven by increases in the educational attainment of the population, in a context of highly convex returns, and by high and accelerating inflation. In the 1990s, the fall in inequality was associated with increasing equality between urban and rural areas, declining returns to education, and falling inflation. Poverty dynamics were closely associated with real wage levels.