Convergence in Brazil: recent trends and long-run prospects

This paper applies to the analysis of the interstate income distribution in Brazil a set of techniques that have been widely used in the current empirical literature on growth and convergence. Usual measures of dispersion in the interstate income distribution (the coefficient of variation and Theil's index) suggest that sigma-convergence was an unequivocal feature of the regional growth experience in Brazil, between 1970 and 1986. After 1986, the process of convergence seems, however, to have slowed down almost to a halt. A standard growth model is shown to fit the regional data well and to explain a substantial amount of the variation in growth rates, providing estimates of the speed of (conditional) beta-convergence of approximately 3% p.a. Different estimates of the long-run distribution implied by the recent growth trends point towards further reductions in the interstate income inequality, but also suggest that the relative per capita incomes of a significant number of states and the number of ‘very poor’ and ‘poor’ states were, in 1995, already quite close to their steady-state values.