The Myth of Post-Reform Income Stagnation in Brazil

Marcos Chamon () and Irineu Evangelista de Carvalho Filho ()

No 06/275, IMF Working Papers from International Monetary Fund

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: CPI bias; trade liberalization; inflation stabilization; economic reform; Income; Brazil; Trade liberalization; Inflation; Economic stabilization; Economic reforms; Consumer price indexes (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: Written 2006-12-13
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