This document aims to shed light on the sharp decline in inequality, poverty and extreme poverty in Brazil between 2001 and 2007. The authors estimate various counterfactual scenarios, in order to understand whether economic growth influenced the decline in inequality, the percentage of poor people, average gap of poverty and in the severity of poverty. Thus, the significance of various factors associated with economic growth is tested. Additionally, the authors analyze the extent to which degrees of discrimination and segmentation in the labor market declined in recent years, quantifying their contribution to the recent reduction in inequality in labor income and per capita income in Brazil. An analysis of educational expansion in the country also allows the authors to better isolate the significance of social and economic factors on the decline in poverty and inequality. The data is taken from the Brazilian Institute of Geography and Statistics (IBGE).
The paper is organized as follows. After the introduction, section two highlights the magnitude of inequality income in Brazil, explaining why is the decline of inequality observed since 2001 pronounced. In section three, the authors explore the importance of this decline for the welfare of the poorest people (i.e. increasing their income and thus reducing poverty and extreme poverty), while the fourth section investigates the immediate determinants of the decline. This section analyzes the counterfactual scenarios as well as the importance of the increase in labor income, the demographic changes and governmental transfers on the reduction of levels of inequality and poverty. Section five isolates the impact of the educational expansion that has occurred during the last decade, and its influence on the decline of inequality, and evaluate in which manner has the decline in the degree of discrimination and market segmentation contributed to the reduction of the degree of inequality in income work and income per capita. Finally, section six concludes.
The authors mainly conclude that:
Regarding the decline in inequality (using the Gini coefficient as the measure of inequality) in income distribution, over half of the drop (60%) is due to improvements in income distribution derived from the work by worker, and 40% to changes in the distribution of income not derived from the work
The reduction in various forms of discrimination and segmentation explains 19% of the decrease in inequality in labor income and 9% of the decrease in per capita income