Regional Growth and Inequality in Brazil: An Analysis Based on the Decomposition of per Capita Income in 2000 and 2010

This paper aims to explain the growth per capita income in Brazil and in its regions between 2000 and 2010, and the inequality per capita income in both years in Southeast and Northeast regions. The choice of this geographic cut is justified by the disparities within these two regions, since the Northeast has the lowest per capita income of the Brazilian regions and Southeast the highest. The model developed by Barros et al. (2004) which computes per capita income in its various determinants allows us to calculate the contribution of each factor to explain the intertemporal and interregional per capita income differentials. Most of the data and indicators used come from the Atlas of Human Development in Brazil, which is an adaptation of the Global Human Development Index produced by the United Nations. The results show that between 2000 and 2010 there was a generalized increase in per capita income in Brazil and that it grew in the Northeast more than in the Southeast reducing interregional inequality. Half of per capita income growth in Brazil and in Northeast and Southeast regions was due to the demographic factor and income from sources other than labor. However, there were significant differences between the regions in terms of labor market factors: the contribution of income per employed adult was small in the Southeast (13.3%), but large in the Northeast (41.1%) and, in turn, the contribution of the proportion of employed adults was significantly lower in the Northeast (10.5%) than in the Southeast (33.5%). These differences show the importance of income transfer policies for per capita income growth in the country and mainly the positive impact of the qualification of the labor force and the investment in physical capital in the Northeast region in order to reduce its inequality in relation to Southeast region.