A Time Series Analysis of Household Income Inequality in Brazil From 1977 to 2013

Abstract This study analyzes the evolution of household income inequality in Brazil from 1977 to 2013. Four quantiles are analyzed: Top 1%, Top 10%, Bottom 10%, and Bottom 50%. The novelty of our study lies in the use of time-series techniques to understand the phenomenon of income inequality. We use the Markov-switching regime change and state-space structural time series techniques. Both strategies suggest that income concentration periods in Brazil are related to low growth rates but high inflation rates. Recent inequality reduction in the shares of the Top 1% quantile can be viewed as a “back to normal” transition.