Book Chapter

What are the main drivers of income distribution changes in the new millennium?

After three decades of persistently high income inequality, from 2001 onwards Brazil experienced a downward inequality trend followed by rising household income growth. Both movements lasted until 2015.

This chapter synthesizes the results of six papers that describe the evolution of Brazilian income distribution. A common approach pursued was to jointly assess inequality, mean income, and social welfare rates of growth. We use a vast array of datasets to fill the gaps found in the literature.

Top incomes movements reduced income inequality fall but increased mean income growth, suggesting challenges in measuring and interpreting inequality changes. Overall, inequality fall was driven by labour earnings through firm-specific effects.

Rising schooling and falling returns also played a role, especially if parents’ educational background is taken into account. Missing income values did not affect inequality measures. Direct and indirect taxes increased inequality trends, while official monetary benefits did help to reduce it.