Chapter 4: Social Programs, Industrial Deconcentration and the Recent Decrease in Regional Income Inequality in Brazil
Raul da Mota Silveira-Neto and Carlos Roberto Azzoni 4.1 INTRODUCTION As pointed out in a series of studies, personal income inequality in Brazil has presented a quite auspicious trend in this century, at least in comparison to the long-lasting country standards (Barros et al., 2006; Ferreira et al., 2006; Hoffmann, 2006; Soares, 2006a, 2006b). Silveira-Neto and Azzoni (2011) showed that such a new trajectory is also replicated in the indicators of regional income inequality among its states. It could be argued that this reduction in regional inequality reflects the convergence of labor productivity predicted by the neoclassical growth model. There are good reasons, however, suggesting that such an argument is insufficient to capture the nature of the recent reduction of regional income inequality in Brazil. First, the intensive income transfer programs carried out by the federal government (Bolsa Família and Benefícios de Prestação Continuada) present regional repercussions. Second, credit policy targeted at specific sectors (mainly manufacturing) seems to have some power in promoting sectoral development in the country’s poorest states. This is the conclusion of Silva et al. (2009) in their analysis of investment projects financed with resources from the Constitutional Development Funds (National Fund for the Development of the Northeast Region, FNE; National Fund for the Development of the North Region, FNO; and National Fund for the Development of the Center-West Region, FCO). Third, a regional deconcentration of manufacturing production is observed in recent years, creating a more qualified demand for labor in poorer states. This...
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