SOCIAL POLICY AS REGIONAL POLICY: MARKET AND NONMARKET FACTORS DETERMINING REGIONAL INEQUALITY

We decompose the recent changes in regional inequality in Brazil into its components, highlighting the role of spatially blind social programs. We aggregate personal income micro data to the state level, differentiating nine income sources, and assess the role of these components in the observed changes in regional inequality indicators. The main results indicate that the largest part of the recent reduction in regional inequality is related to the dynamics of the market-related labor income, with manufacturing and services favoring deconcentration. Labor income in agriculture, retirement and pensions, and property rents and other sources favored concentration. The social programs Bolsa Familia and Beneficios de Prestacao Continuada are responsible for more than 24 percent of the reduction in inequality, although they account for less than 1.7 percent of the disposable household income. Such positive impact on regional concentration is impressive, since the goals of the programs are clearly nonspatial.