This article seeks to explain declining regional inequality in Brazil by exploring the economic ‘catch-up’ of Brazil’s poorest region. To that end, the article analyzes income policies as well as supply-side policies aimed at improving the productive capacity of poor regions, and presents data showing that both have proven more important than the current literature suggests. The article also introduces the concept of regional Keynesian effects, and provides preliminary evidence for its relevance, to demonstrate that income policies, such as cash transfers to poor regions, have the potential to foster local output growth.
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