Macroeconomic Performance and Inequality : Brazil 1983-94

We examine in this paper how macroeconomic performance, mainly in the role of high and volatile rates of inflation, affected earnings inequality in the 1980s and early 1990s in Brazil. The empirical evidence presented shows that the extreme inflation, combined with the incomplete indexation coverage existent at the time, had a regressive and significant impact on inequality. The results, based initially on national time series, and then on subnational panel time series Tgt;N data and analysis, are robust for different concepts of inflation, inequality measures, estimators and specifications. Hence, sound macroeconomic policies, which keep inflation low and stable in the long run, are to be a necessary first step of any public policy package implemented to alleviate inequality and improve welfare in Brazil