Income Distribution and Economic Growth: The Case of Brazil

By Matins-Bekat, Camila; Kulkarni, Kishore G. | The Journal of Developing Areas, Fall 2009 | Go to article overview

Income Distribution and Economic Growth: The Case of Brazil


Matins-Bekat, Camila, Kulkarni, Kishore G., The Journal of Developing Areas


ABSTRACT

In a perfect world, it will be great if the growth can be distributed equally and all poverty is removed simultaneously. Unfortunately, as Simon Kuznets has pointed out, economic growth is rarely distributed equally, in fact, according to him, economic growth initially leads to higher income inequality of income, as some sectors grow faster and some do not grow at all. In this paper, we apply the Kuznets hypothesis to the Brazilian case. Our test shows that in case of Brazil, the Gini coefficient has in fact behaved as Kuznets predicted.

JEL Classifications: O54, O40

Keywords: Income distribution and economics growth, country studies: Brazil

INTRODUCTION

As inequality applied to income and economic inequality, is a very complex issue. Economists, sociologists, and political scientists are only a few of the researchers concerned with economic inequality. Is all inequality equal in its effects? Alternatively, do certain types of inequality spur growth while others damage it? Concrete answers to questions regarding the relationship between inequality and economic growth have not been found (see Introduction: Seligson and Passé-Smith, 2003). More specifically, development economists have been trying to understand the reasons why economic inequality is higher in countries that grow fast. Is economic growth the culprit?

These and other related questions have been the focus to study for several prominent economists. Simon Kuznets developed the most famous hypothesis of the relationship between inequality and economic growth. He argued that as a country develops, income inequality initially increases, and only after some time, it declines. In the first section of this paper, we will briefly discuss the social, political, and economic impact of income inequality. The second section is a review of the literature for and against Kuznets. hypothesis. In section three, we will apply Kuznets. hypothesis to the case of Brazil using time-series data. Suggestions for ameliorating income inequality in Brazil are discussed in the conclusion.

IMPACTS OF INCOME INEQUALITY

Social

Gottschalk and Justino (2006) highlight several important studies regarding the social impact of income inequality and present the argument that high inequality may deteriorate stocks of human capital when associated with high illiteracy and poor health. Ribero and Nunez showed that there is a negative correlation between disability and stature and the ability to earn an income. In other words, an individual.s ability to earn money decreases as their nutritional status deteriorates (Gottschalk and Justino, 2006).

The evidence suggests that another social impact of income inequality is the positive relationship between high inequality and forms social and political conflict (Lichbach, 1989 in Gottschalk and Justino, 2006). If the poorest 20% of a society control less than one percent of the national income, their hardships are exasperated. Lack of access to education, healthcare, social security and jobs only fuel the sentiment that the government is not doing its share to alleviate their suffering. Once the tolerance threshold for inequality is reached, society is faced with what Hirschman and Rothschild (1973) called the Tunnel Effect (Ray 1998). The implications of Hirschman.s tunnel effect hypothesis on economic growth policy are significant. If the tunnel effect is present in a weak society, then an economic policy focused on aggregate growth would not be a prudent choice. Instead, the society should choose a policy that would address growth and distribution simultaneously (1998).

Political

Illiterate and poor, the individuals at the lowest ranks of society are often excluded from the political arena either because they cannot afford to vote or due to voter corruption. The latter takes the form of candidates offering small amounts of money to the poor in return for their ? …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Income Distribution and Economic Growth: The Case of Brazil
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.