Texto para Discussão, Instituto de Pesquisa Econômica Aplicada (IPEA) 1435
The objective of this text is to analyze the changes in inequality of household per capita income distribution in Brazilian states between 2004 and 2006 and estimate how much of the change is due to non-contributory income transfers from the federal government: Programa Bolsa Família (PBF) and Benefício de Prestação Continuada (BPC). The methodology used is decomposition of the Gini coefficient by factor components. The Gini coefficient is merely the sum of the concentration coefficients of each income source weighted by the relevance of each income source in total income. Our results are as follows. Between 2004 and 2006 the Gini coefficient fell by one Gini point (x100). This tendency was followed by all states bar seven, and increases in inequality in Alagoas and Maranhão are especially worrisome. A clear regional pattern can be found in the causes of the reduction in the internal inequality of the states. In the Northern and Northeaster states, income transfers, principally the PBF, were undoubtedly the driving force behind inequality reduction. In these regions BPC and PBF were responsible for half of total inequality reduction, on average (unweighted). The unweighted average in the Northeast was 88%. In the states of the South, Southwest and Center-West, BPC and PBF were important, but their contribution to the reduction in inequality was 24% on average (unweighted). In these areas labor income was the driving force behind inequality reduction, accounting for 53% of the unweighted average fall.