Housing, Inequality and Economic Growth: Evidence from a Sample of Brazilian States

Abstract

This paper investigates the inequality-growth nexus using state-level data for Brazil from 2005 to 2013 and considers that the housing deficit better reflects inequality in the Brazilian economy, a highly unequal country. We estimate a growth regression where the housing deficit is the main explanatory variable taken alongside other control variables. The findings point to the existence of a negative linear association between the housing deficit and the growth rate of real GPD per capita across the 27 Brazilian states, with a higher explanatory power relative to the regressions that use the Gini index. The association is also stronger for the sample of richer states. Other statistically significant regressors include initial income and human capital/education. Our findings endorse investing in housing as a potential important means for fighting inequality and promoting faster economic growth in Brazil. Attention should also be given to broadening access to higher quality utilities such as electricity and sanitation. The promotion of universal access to education as a means to increase the human capital stock is also a path to achieve faster growth in Brazil.