The Myth of Post-Reform Income Stagnation in Brazil

Irineu de Carvalho Filho and Marcos Chamon ()

No 2006/275, 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: WP; durable goods; price index; CPI bias; Trade Liberalization; Inflation Stabilization; Economic Reform; bias estimate; expenditure data; expenditure inequality; income growth; expenditures notebook; Personal income; Consumer price indexes; Total expenditures; Household consumption; Global (search for similar items in EconPapers)
Pages: 34
Date: 2006-12-01
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Citations: View citations in EconPapers (20)

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