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The present Report is motivated by the
coming together o f three widespread perceptions about
inequality, two somewhat newer and one long-standing. The
two newer ones are; (i) that inequality may matter for the
country's economic development, and (ii) that public
policy can and should do something about it. The old
perception, which is well borne out b y the facts, is that
Brazil occupies a position o f very high inequality in the
international community. Therefore, this report tries to
explain what makes Brazil so unequal and to what extent the
interaction o f labor market forces and public policies -or
the lack of them- contribute to this undesirable outcome.
For instance, in what measure is social mobility becoming
more independent o f family background thanks to progressive
public policies in basic education, health and nutrition.
Accordingly, the report is organized around three basic
questions. The first section asks why inequality might
matter for the country's economic development. Why it
matters for poverty reduction, for social justice equality o
f opportunities and social mobility, and for economic and
political efficiency. The second section asks why Brazil is
so unequal. It seeks a deeper understanding of what lies
behind Brazil's position as one of the most unequal
countries in the world, as shown in typical international
comparisons, the dynamics of income inequality, and the
magnitude of inequality across regions, racial groups, and
gender. Then, it attempts to shed light on why this may be
so. It investigates the causes of Brazil's excess
inequality in four dimensions: the distribution of assets -
human and nonhuman-, the price of those assets, the
behavioral difference in the labor market and fertility,
and, finally, the distribution of state transfers and
entitlements - public expenditure and taxation-. The third
section asks whether there is a role for public action aimed
at reducing inequalities, and considers some lessons from
theory and evidence on the relative effectiveness of
alternative approaches. First, it considers how the
provision of education might affect not only the
distribution of human assets in the long run but the
relative prices of human capital for different levels of
skill. Second it examines how public policy toward rural
land use must take into account inefficiencies that are
closely linked to inequities of land distribution. Finally,
it investigates how taxation and public expenditure policies
reduce income inequality and inequality of access to basic
social services. The fourth section concludes.
