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Income Distribution & Economic Growth: The Case of Brazil

Income Distribution & Economic Growth: The Case of Brazil. Camila Matins- Bekat & Kishore G. Kulkarni. Victoria Han & Vesselina Pentcheva. P ertinent Questions. Is all inequality equal in its effect? Why is economic inequality higher in countries that grow fast?

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Income Distribution & Economic Growth: The Case of Brazil

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  1. Income Distribution & Economic Growth: The Case of Brazil Camila Matins-Bekat& Kishore G. Kulkarni Victoria Han & VesselinaPentcheva

  2. Pertinent Questions Is all inequality equal in its effect? Why is economic inequality higher in countries that grow fast? Is economic growth a culprit?

  3. Kuznets’ Hypothesis “As a country develops, income inequality initially increases, and only after some time, it declines.”

  4. Impacts of Income Inequality • Social • High inequality deteriorates stocks of human capital • Political • The poor are often excluded in the political arena • Economic • Poverty trap

  5. Kuznets’ Inverted-U Hypothesis

  6. Application to Brazil • “Income distribution in Brazil is among one of the most unequal in the world.” • High volume of social mobility • “Inferior low”  “superior low”  “inferior medium” • Skin color counts for 12% of income inequality in Brazil

  7. The Debt and Inflation Crises • The debt crisis was the result of careless borrowing and irresponsible spending habits. • Hyperinflation in the 1980s • Inflation rates were over 1000% • Increase of income inequality

  8. Stabilization • 1994-2005: policies and reforms enacted by President Cardoso • New currency, the Real, 1994 • Pegged 1:1 with the U.S. dollar • Fiscal balance • Plano Real

  9. Conclusion • Brazil fits the inverted U path • Drivers of the decline to inequality • Successful governmental policies • BolsaEscola • BolsaFamilia

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