Brazil has made improvements in reducing inequality despite growing at a good rate in recent years. Inequality, measured by the Gini coefficient, fell from 0.59 in 2001 to 0.53 in 2007. How is it possible that inequality fell despite high economic growth? The authors of this one pager#89 from IPC argue that it is because of good social policies, mainly two possible causes:
- Improvements in education (universal admission to primary schooling and lower repetition rates). The authors estimate that the impact of improved access to education on primary income distribution was 0.2 Gini points per year from 1995 onwards.
- Direct cash transfers from the state to families and individuals. An often cited example is a conditional cash transfer program called Bosla Familia. The authors estimate that cash transfers contributed to reductions in inequality of another 0.2 Gini points per year.
These social programs have stimulated aggregate demand, especially through an increase in consumption.
The main point is that two-thirds of the decline in inequality is explained by relatively successful social policies. The remaining third is attributed to “a virtuous cycle of increased income, expansion in domestic market and rising demand for labor.”
