Regional Socio-Economic Transformation in Brazil

The regional income disparities in Brazil are well-known. Since the 1930s, such income disparities have declined only slightly. This thesis combines traditional economic theory with insights from regional science and economic geography to explain the development pattern in Brazil throughout the 20th century, using a wide range of data sets. It contributes to the consolidation of the field of New Economic Geography because some tools employed in this thesis have not yet had widespread use in the literature. The thesis also brings new insights for the understanding of Brazil’s development process. The key finding of the thesis is that there has been almost time-invariant spatial autocorrelation in Brazil’s growth process that impedes the lagging regions from catching up. The reason for this is that there is a clear cluster of contiguous rich regions (Southeast and South) – i.e. the core - characterised not only by high real income levels and high market potential, but also by the fact that they have the largest markets and are the platform of the global economy in Brazil. In contrast, there is another cluster of contiguous poor regions (North and Northeast) – the periphery - that has low real income levels, low market potential and low market access. The agglomeration of population and economic activity explains the observed concentration pattern. Although there were some efforts made through regional development policy to narrow the gaps amongst the regions, the agglomeration forces are very strong in Brazil. The creation of Brasília did not offset these agglomeration forces, partially because place-based policies matter. The creation of Brasilia obviously had major implications for Brasilia itself, but did not offset the agglomeration forces that led to the dominance of São Paulo. Similarly, investment in other lagging regions may not offset the advantages of São Paulo and Rio de Janeiro, but they may improve economic conditions in the lagging regions themselves if income transfers or subsidies are done for efficient industries