Education or Inflation? The Roles of Structural Factors and Macroeconomic Instability in Explaining Brazilian Inequality in the 1980s

This paper investigates possible explanations for the increases in inequality observed in Brazil during the 1980s. While the static decompositions of inequality by household characteristics reveal that education and race of the household head, as well as geographic location, can account for a substantial proportion of inequality levels, a dynamic decomposition suggests that changes in inequality are not explained by income or allocation effects across these groupings, but by pure within-group inequality effects. The analysis then turns to the role of macro-economic instability, and finds some significant correlation and regression coefficients which suggest a link between inflation and inequality, while poverty appears to be more strongly driven by real wages, growth and employment.