اثر نابرابری درآمد بر رشد اقتصادی کشورهای برزیل: آنالیز با استفاده از مدل پانل همپوشانی Effects of income inequality on the economic growth of Brazilian states: an analysis using the cointegrated panel model

1 Introduction Income inequality is a recurring theme in the Brazilian economy, principally with regard to studies of economic growth. This discussion gained ground in the economics literature of the 1990s with a series of studies investigating the role of income inequality in the process of economic growth. The following question always arises in this type of analysis: How does income inequality affect economic growth? Two different approaches to this topic have been taken. The first, represented by Bertola (1991), Perotti (1992), Persson and Tabellini (1994), and Alesina and Perotti (1996), suggests the existence of mechanisms by which greater inequality harms economic growth; these include an endogenous fiscal policy, social and political instability, imperfect credit markets, and endogenous fertility rates. Another branch of the economics literature emphasizes the beneficial effect of greater initial inequality in spurring economic growth through three channels: Kaldor’s hypothesis, indivisible investment costs, and trade-offs between efficiency and equity. Stigliz (1969), Lazear and Rosen (1979), Li and Zou (1998), and Forbes (2000) are among the authors who emphasize this type of correlation. Starting from this discussion, the present study investigates the effects of income inequality on the economic growth of different Brazilian states from 1994 to 2014. This study’s main contribution is empirical because it presents stylized facts that aid in understanding the effects of income concentration on economic performance in different regions of Brazil. Regional disparities in Brazil have always been a cause for concern and a subject of national debate, especially after the creation of the Superintendency for the Development of the Northeast (Superintendência do Desenvolvimento do Nordeste – SUDENE) in 1950. The notion of regional disparities is even more obvious when regional economic indicators are presented, such as those emphasized by Rands (2011). The numbers show that although the Northeast is home to 28% of the Brazilian population, it has a per capita gross domestic product (GDP) that is only 46.8% of the national per capita GDP, and only 35.3% of the per capita GDP found in the Southeast, which is the highest in the nation.1 Other regions, such as the North and Center-West (excluding the federal district of Brasília) are also relatively poor, though their per capita GDPs are still higher than the Northeast