The Role of the Demographic Transition to Changes in Income Inequality and Poverty Rates in Brazil

Simone Wajnman, Centro de Desenvolvimento e Planejamento Regional (CEDEPLAR), UFMG
Cassio M. Turra, Centro de Desenvolvimento e Planejamento Regional (CEDEPLAR), UFMG

Brazil is among the 30% wealthiest economies in the world, measured by its per capita income. Yet, about one third of the Brazilian population is below the poverty line. Fortunately, in the last decade, poverty rates have been declining mainly because of more equal income distribution in a context of better macroeconomic conditions. Nonetheless, other factors responsible for these improvements need to be examined more systematically, including demographic changes. In the context of a rapid demographic transition, one should expect large effects on social and economic measures from changes in population composition. In this article, we examine how changes in the age composition of adults have affected income inequality and poverty rates in Brazil. We use a counterfactual micro-simulation model to disentangle each one of these effects during two time periods that were characterized by important economic and demographic changes.