Changing Social Contracts: Beliefs and Dissipative Inclusion in Brazil

44 Pages Posted: 7 Dec 2012

See all articles by Lee J. Alston

Lee J. Alston

Ostrom Workshop; National Bureau of Economic Research (NBER)

Marcus Andre Melo

Universidade Federal de Pernambuco (UFPE)

Bernardo Mueller

Universidade de Brasilia

Carlos Pereira

Getulio Vargas Foundation (FGV)

Date Written: December 2012

Abstract

Social contracts about inequality and redistribution are country-specific. We rely on a model of inequality and redistribution where multiple steady states can emerge in given country. We link the model to the recent literature on beliefs and argue that beliefs are a major determinant of which equilibrium results. We show that changes in beliefs may shift the equilibrium in a country over time. We present evidence that beliefs are typically very stable over time, yet argue that Brazil has recently undergone a dramatic shift in beliefs which we show is associated with a change in the country's social contract in the past thirty years. The transition from one social contract to another has taken place through a process which we call 'dissipative inclusion', where redistribution and social inclusion are effectively achieved but accompanied by distortions, inefficiencies and rent dissipation.

Suggested Citation

Alston, Lee J. and Melo, Marcus André and Mueller, Bernardo and Pereira, Carlos, Changing Social Contracts: Beliefs and Dissipative Inclusion in Brazil (December 2012). NBER Working Paper No. w18588. Available at SSRN: https://ssrn.com/abstract=2186318

Lee J. Alston (Contact Author)

Ostrom Workshop ( email )

513 N. Park Avenue
Bloomington, IN 47408–3895
United States

HOME PAGE: http://ostromworkshop.indiana.edu/alston/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marcus André Melo

Universidade Federal de Pernambuco (UFPE) ( email )

Cidade Universitária
Cidade Universitária, Pernambuco 50670-901
Brazil

Bernardo Mueller

Universidade de Brasilia ( email )

Dept. de Economia
Universidade de Brasilia
Brasilia, DF 70910-900
Brazil
55 61 981110349 (Phone)
55 61 3349-1303 (Fax)

HOME PAGE: http://bpmmueller.wixsite.com/bernardo-mueller

Carlos Pereira

Getulio Vargas Foundation (FGV) ( email )

R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil

HOME PAGE: http://ebape.fgv.br/en/faculty-members/carlos-pereira

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