Book contents
- Frontmatter
- Contents
- List of tables and figures
- Preface
- Part I Growth, employment creation, and inequality in Brazil
- 1 Introduction
- 2 Production and employment trends in the postwar period
- 3 Rising inequality since 1960
- 4 The meaning and interpretation of rising inequality in a growing economy
- 5 Evidence on absolute improvements and upward mobility
- Part II The effect of supply and demand on labor markets during rapid economic growth
- Data appendix
- Bibliography
- Index
4 - The meaning and interpretation of rising inequality in a growing economy
Published online by Cambridge University Press: 07 October 2011
- Frontmatter
- Contents
- List of tables and figures
- Preface
- Part I Growth, employment creation, and inequality in Brazil
- 1 Introduction
- 2 Production and employment trends in the postwar period
- 3 Rising inequality since 1960
- 4 The meaning and interpretation of rising inequality in a growing economy
- 5 Evidence on absolute improvements and upward mobility
- Part II The effect of supply and demand on labor markets during rapid economic growth
- Data appendix
- Bibliography
- Index
Summary
The trend toward rising inequality that has been associated with growth in Brazil has been widely noted and harshly criticized. No one is particularly attracted to a development strategy in which the income share of the poor systematically shrinks while the share of the rich expands, as both did in Brazil. It is tempting to translate these facts about inequality into conclusions about social welfare, for rising inequality usually indicates falling social welfare. One might conclude that Brazil's 1970 distribution – so much less equal than that of 1960 – is worse in terms of social welfare. This may be, yet the connection between social welfare and inequality, which seems so obvious at first glance, really is nothing of the sort for economies with growing populations and incomes.
In making social-welfare judgments based on the distribution of income, we are forced either implicitly or explicitly to make interpersonal comparisons of utility. The simplest possible case is one where the total income and population are constant, and alternative distributions are generated by taking income away from some people and giving it to others. If the marginal utility of the extra income is higher for the receiving than the donating individuals, we can say that social welfare is higher in the transformed distribution. Now make the egalatarian assumption that all individual utility functions are identical and that the marginal utility of income is falling. Then the more equal the distribution, the higher the level of social welfare. Under these assumptions an increase in inequality implies a fall in social welfare. Equality is better.
- Type
- Chapter
- Information
- Labor Markets and Inequitable GrowthThe Case of Authoritarian Capitalism in Brazil, pp. 72 - 82Publisher: Cambridge University PressPrint publication year: 1983