Anti-miracle, sectoral heterogeneity and the decline of inequality in Brazil

Abstract

This article investigates the income-reducing dynamics in Brazil from 2003 to 2018, focusing on the role of sectoral transformations in the labor market. Using data from the Annual Social Information Report (RAIS) and a task-based approach, the study examines how policies such as minimum wage increases and income transfer programs reshaped consumption patterns. These policies boosted demand in labor-intensive sectors, such as construction, commerce, and services, creating a virtuous cycle of employment growth and wage increases for low-skilled workers.The findings reveal that until 2012, sectoral reallocations significantly contributed to income inequality reduction, driven by the expansion of labor-intensive sectors. However, structural changes within these sectors were limited, indicating that redistribution occurred through shifts in employment across sectors rather than within-sector occupational transformations. The economic slowdown after 2012 reversed some of these advances, exposing structural challenges in sustaining redistributive dynamics during periods of economic deceleration.The study concludes that sectoral dynamics played a critical role in reducing inequality during the growth period but highlighted the structural limitations of Brazil's economy to sustain these gains over time.