Ethno-Racial Poverty and Income Inequality in Brazil

Fiscal policy played an important role in reducing poverty and inequality in Brazil (Higgins and Pereira, 2014) over the last fifteen years, but how much redistribution and poverty reduction is being accomplished across ethnic groups? How was the ethno-racial divide affected by fiscal policy? We estimate the effects of taxes and social spending on inequality and poverty among ethnic groups using household survey. We find that direct transfers have similar effects on inequality across ethnic groups, but the reduction is larger for pardos after adding the monetized in-kind benefits (health and education). However, the income ratio between whites and non-whites is virtually unchanged. Poverty is reduced after direct transfers, but the reduction is higher for whites despite the prevalence of poverty is at least twice as high among pardos, blacks, and indigineous. The positive effects on poverty is tempered by a deleterious effect from indirect taxes. In addition, per capita transfers are on average higher for whites and benefits can twice as large as those for non-whites. Fiscal interventions did not have a significant impact in reducing the divide between whites and non-whites in Brazil.