VoxDev Development Economics S6 Ep22: Understanding Brazil’s falling income inequality
Jun 4, 2025
Alysson Portella, an economist at Insper specializing in inequality and labor economics, discusses Brazil's impressive reduction in income inequality from 1995 to 2015. He explains the effective policies that contributed to this change, contrasting Brazil's progress with rising inequality in high-income countries. Portella highlights the rise of a new middle class and challenges in policy implementation and evaluation. He examines the intricate factors impacting wage structures, labor market responses to education, and the effects of affirmative action.
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Brazil's Decline in Wage Inequality
- Brazil's wage inequality was among the highest globally in 1995 but significantly declined by 2015.
- This drop contrasts with increasing inequality trends in many high-income countries during the same period.
Visible Poverty Reduction in Brazil
- Alysson Portella recalls visible poverty reduction in Brazil such as less starvation in the northeast region.
- He also mentions discussions around the emergence of a new middle class during his college years.
Wage Structure Drives Inequality Drop
- Changes in wage inequality can be decomposed into worker composition and wage structure effects.
- In Brazil, most inequality reduction came from changes in how the labor market rewards worker characteristics, not just changes in workforce composition.