Climbing a Moving Mountain: Explaining the Decline in Income Inequality in Brazil from 1976 to 1996
By Francisco H.G. Ferreira , Ricardo Paes de Barros (10/98, En) See also Poverty and Inequality
Brazilian income inequality fell between 1976 and 1996. The Theil index declined from 0.86 to 0.69, and the Gini coefficient also fell, although by less. Over the same period, however, the earnings-education profile became more convex, and our simulations indicate that applying the 1996 structure of returns to education to the (otherwise unchanged) 1976 population would have increased, rather than lowered, inequality. Changes in other returns (to experience, or gender) as well as changes in labor force participation behavior also contribute to an increase in dispersion. Residual changes (in the joint distribution of observable and unobservable individual characteristics across the population) must account for the observed declines in inequality. We hypothesize that one important component of these equalizing changes might have been a change in the educational composition of the population. By moving a sufficient number of workers up along the (shifting) earnings-education profile, this effect would have overwhelmed the others, and reduced inequality. It would also have offset a tendency for poverty to increase over the period.
Last updated: 05/08/07
