The Myth of Post-Reform Income Stagnation in Brazil, Issues 2006-2275
This paper uses Engel curves to estimate real income growth in Brazil. The estimated per capita household real income growth in metropolitan areas during 1987-2002 is about 4½ percent per year, well above the "headline" growth of 1½ percent obtained by deflating nominal incomes by the CPI. This suggests a substantial CPI bias during that period, likely owing to one-off effects of trade liberalization and inflation stabilization. The estimated unmeasured gains are higher for poorer households, implying a marked reduction in "real" inequality. This finding challenges the conventional wisdom that post-reform real income growth in Brazil was low.
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The Myth of Post-Reform Income Stagnation in Brazil
Irineu E. Carvalho Filho,Mr. Marcos Chamon
Limited preview - 2006
aggregate bias Annual bias anthropometric average household bias estimates Brazil capita expenditure collective expenditures notebook cost of living CPI basket CPI bias CPI-deﬂated CPI-Measured Real Cumulative bias Curitiba deﬂating nominal income dummies Engel curves Engel’s Law equation estimated bias expenditure distribution expenditure level expenditure on food expenditure weighted ﬁnd ﬁrst food budget share food declines food share full sample gross change headline household characteristics Household per capita IBGE improvements income distribution increase inﬂation IPCA levels of expenditure linear regressions Ln(Expenditure/CPI log of real log of total Mean Median Bottom Median Bottom 20 metropolitan areas minimum wage mismeasurement Number ages obtained by deﬂating parametric estimates percent Plano Real Porto Alegre post-reform price index price of food reais real expenditure real income growth reference period relative prices Semi-Parametric Estimates Sensitivity to income share of food speciﬁcation spouse Table three surveys top quintile total expenditure true cost true real income