M.F. Meyer Bittencourt
Working Paper No. 05/114 - UPDATED VERSION
We examine how macroeconomic performance, mainly in the role of high inflation, affected earnings inequality in the 1980’s and early 90’s in Brazil. The evidence shows that the extreme inflation rates, combined with the incomplete indexation coverage existent at the time, had a regressive and significant impact on inequality. The results, based on panel time series T>N data and analysis, are robust for different concepts of inflation, inequality measures, estimators and specifications. Hence, sound macroeconomic policies, which keep inflation low and stable in the long run, are to be a necessary first step of any policy implemented to alleviate inequality and improve welfare in Brazil.
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