Texto para Discussão, Instituto de Pesquisa Econômica Aplicada (IPEA) 1816
This paper aims to explain the immediate causes of per capita income growth, the decline in income inequality and poverty reduction in five different geographic regions - Brazil, the Northeastern region, the state of Bahia, the metropolitan area of Salvador and nonmetropolitan areas of Bahia - between 2003 and 2011. More specifically, we assess whether these five regions followed the same general pattern and inquire about the sustainability of this process of pro-poor growth. Our results show that while income growth was higher in the poorer regions, it was generally driven by rising labor market earnings. The fall in income inequality, however, did not display such a clear-cut pattern: the richer regions experienced a larger decline in inequality, fostered mainly by the labor market, while the poorer regions became less unequal mostly due to the Programa Bolsa Família. Thus, both growth and redistribution contributed decisively to poverty reduction in Brazil and the metropolitan area of Salvador, but only income growth mattered in the other three regions. Therefore, the long-term prospects for pro-poor growth and poverty reduction in Brazil will hinge on a more equitable labor market in the Northeastern region and in the nonmetropolitan areas of Bahia.