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Geography and Income Convergence among Brazilian States

  • Carlos A. Azzoni
  • Naercio Menezes-Filho
  • Tatiana de Menezes
  • Raúl Silveira-Neto

The objective of the study is to identify the role of geographical variables in explaining differences in per capita income among Brazilian states. It also aims at ascertaining the degree to which such variables affect convergence or divergence trends in per capita income among these states. In order to investigate these issues it uses micro-data, instead of the more traditional aggregate data, averaged up from household to birth cohort level. Both the level and the change in average household income per capita across Brazilian states are correlated to geographical and household variables. The aim is to capture not only the influence of household human capital and wealth variables on the convergence of per capita income (along the lines of the neoclassical model), but also that of spatial or geographical characteristics, such as public infrastructure, health and education services. Therefore, this paper simultaneously considers data on geographical variables and repeated cross-sections of household surveys. The use of cohort level data means that we can construct cohort/state/year means for all variables of interest and control for state, life cycle and composition effects for the first time in this literature. The results indicate that the geographical variables seem to be important determinants of income levels and growth. Altogether, the results indicate that human capital and infrastructure variables are important areas for government intervention, as these are some of the main factors behind the differences in steady-state rates of income growth in Brazil.

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 3096.

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Date of creation: May 2000
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Handle: RePEc:idb:wpaper:3096
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  1. Attanasio, Orazio P & Browning, Martin, 1995. "Consumption over the Life Cycle and over the Business Cycle," American Economic Review, American Economic Association, vol. 85(5), pages 1118-37, December.
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  8. Ravallion, Martin & Wodon, Quentin, 1997. "Poor areas, or only poor people?," Policy Research Working Paper Series 1798, The World Bank.
  9. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  10. Carlos R. Azzoni, 2001. "Economic growth and regional income inequality in Brazil," The Annals of Regional Science, Springer, vol. 35(1), pages 133-152.
  11. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
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