The myth of post-reform income stagnation: Evidence from Brazil and Mexico

Economic policies are often judged by a handful of statistics, some of which may be biased during periods of change. We estimate the income growth implied by the evolution of food demand and durable good ownership in post-reform Brazil and Mexico, and find that changes in consumption patterns are in...

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Bibliographic Details
Published in:Journal of development economics 2012-03, Vol.97 (2), p.368-386
Main Authors: Filho, Irineu de Carvalho, Chamon, Marcos
Format: Article
Language:English
Subjects:
Consumption
CPI bias
Economic policy
Economic reform
Estimation bias
Growth rate
Household consumption
Income inequality
Inflation stabilization
Measurement error
Studies
Trade liberalization
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Summary:Economic policies are often judged by a handful of statistics, some of which may be biased during periods of change. We estimate the income growth implied by the evolution of food demand and durable good ownership in post-reform Brazil and Mexico, and find that changes in consumption patterns are inconsistent with official estimates of near stagnant incomes. That is attributed to biases in the price deflator. The estimated unmeasured income gains are higher for poorer households, implying marked reductions in “real” inequality. These findings challenge the conventional wisdom that post-reform income growth was low and did not benefit the poor.
ISSN:0304-3878
1872-6089
DOI:10.1016/j.jdeveco.2011.06.009