Extreme and Persistent Inequality: New Evidence for Brazil Combining National Accounts, Surveys and Fiscal Data, 2001-2015

This paper reexamines the evolution of income inequality in Brazil over the last fifteen years using a novel combination of data sources. We measure distributional national accounts (DINA) to produce a new series of pretax national income inequality, com bining annual and nationally representative household survey data with detailed information on income tax declarations, in a consistent manner with macroeconomic totals. Our results provide a sharp upward revision of the official estimates of inequality in Brazil, while the falling inequality trends are less pronounced than previously measured. The concentration of income at the top is striking, with the Top 1% income share increasing to 28.3% by the end of the period, from an initial share of 26.2%. The Top 10% increased their share of income from 54.3% to 55.6% of pretax national income and captured 62.5% of total growth. The Bottom 50% share rose from 12.6% to 13.9%, experiencing higher growth than the top decile, but capturing only 20% of total growth due to its extremely low command of income. While elites and the poor made gains, the Middle 40% of the distribution decreased its share from 33.1% to 30.6%, posting less growth than the average for the whole economy. The "squeezed middle" is a product of its relatively low share of income and poor growth performance. Overall, inequality within the bottom 90% declined while concentration at the top grew, effects manifested in the slight downward trend of the corrected Gini coefficient. The former was driven by falling inequality in the distribution of labour income, which we document after combining surveys and fiscal data. While labour income inequality (and especially the formal earnings component) registered a clear decline according to our series –following the sharp rise in the real minimum wage, falling informality and fading out of the education premium – it was insufficient to mitigate the extreme inequality of capital resources and reverse the growing concentration of national income among elite groups.