The Myth of Post-Reform Income Stagnation in Brazil

36 Pages Posted: 12 Jan 2007

See all articles by Irineu de Carvalho Filho

Irineu de Carvalho Filho

International Monetary Fund (IMF)

Marcos Chamon

International Monetary Fund (IMF) - Research Department

Date Written: December 2006

Abstract

This paper uses Engel curves to estimate real income growth in Brazil. The estimated per capita household real income growth in metropolitan areas during 1987-2002 is about 4½ percent per year, well above the "headline" growth of 1½ percent obtained by deflating nominal incomes by the CPI. This suggests a substantial CPI bias during that period, likely owing to one-off effects of trade liberalization and inflation stabilization. The estimated unmeasured gains are higher for poorer households, implying a marked reduction in "real" inequality. This finding challenges the conventional wisdom that post-reform real income growth in Brazil was low.

Keywords: Income, Brazil, Trade liberalization, Inflation, Economic stabilization, Economic reforms, Consumer price indexes

JEL Classification: D12, E1, I32, O10, F15

Suggested Citation

de Carvalho Filho, Irineu and Chamon, Marcos, The Myth of Post-Reform Income Stagnation in Brazil (December 2006). IMF Working Paper No. 06/275, Available at SSRN: https://ssrn.com/abstract=956738

Irineu De Carvalho Filho (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Marcos Chamon

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-5867 (Phone)

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