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After three decades of persistently high-income inequality, from 2001 Brazil experienced a downward inequality trend followed by rising mean income growth. Both movements lasted until 2014 according to household surveys. This work describes Brazilian income distribution trends and their close determinants using a vast array of data sets and empirical methodologies to fill gaps found in the literature (including an update). It attempts to provide a more comprehensive picture looking jointly at inequality, mean, and social welfare growth rates. Overall, most of the distributive gains were driven by labor earnings, a channel dominated by firm-specific effects according to matched employer-employees datasets (RAIS). Rising schooling and falling returns also played a key role, especially if parents’ educational background is taken into account (special supplement PNAD). Missing income values did not affect inequality or mean income trends (PNAD) while replacing top incomes with personal income tax (PIT) data reduced income inequality fall but increased mean income growth, suggesting complex measurement and interpretation challenges. Microsimulation exercises based on various datasets (POF) suggest that direct and indirect taxes inhibited inclusive growth trends, while official monetary benefits did help, in particular conditional cash transfers. They were better targeted than all other transfers, most of which linked to the Brazilian minimum wage.

Marcelo Neri is the Director of FGV Social at Getulio Vargas Foundation. He holds a PhD in Economics, Princeton University. He was President of the Institute for Applied Economic Research (Ipea); the Secretary-General of the CDES and Minister of Strategic Affairs (SAE/PR). He has evaluated policies in more than a dozen countries and also designed and implemented policies at three government levels in Brazil.

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