The Myth of Post-Reform Income Stagnation: Evidence from Brazil and Mexico

Author/Editor: Carvalho Filho, Irineu E. ; Chamon, Marcos
Publication Date: August 01, 2008
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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.
Series: Working Paper No. 08/197
Subject(s): Brazil | Mexico | Data analysis | Economic reforms | Income | Private consumption | Consumer prices | Deflation | Economic models | Economic policy

Author's Keyword(s): Household consumption | Measurement error | CPI Bias | Economic reform | Trade liberalization | Inflation stabilization.
Publication Date: August 01, 2008
Format: Paper
Stock No: WPIEA2008197 Pages: 52
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