Chapter 6

Redistribution and Long-Term Growth

Abstract

Even if redistribution to the poor provokes a reduction in economic growth in the short- and mid-term, it can have a beneficial long-term effect. Since inequality is falling, it is possible that the country enters a virtuous cycle where there would be a gradual increase in the middle class and a reduction of the poor in need of public redistributive policies. This would create political support for the reduction in privileges conceded to the rich and social assistance to the poor. However, it is possible that Brazil enters a vicious cycle of low growth with dissipative redistribution. Inequality may stop falling and remain at a high level. It would perpetuate the present distributive conflict. ...

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