Changing Social Contracts: Beliefs and Dissipative Inclusion in Brazil / Lee J. Alston, Marcus Melo, Bernardo Mueller, Carlos Pereira.

Format:

Book

Author/Creator:

Alston, Lee J.

Contributor:

National Bureau of Economic Research.

Melo, Marcus.

Mueller, Bernardo.

Pereira, Carlos.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18588.

NBER working paper series no. w18588

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

Social contracts about inequality and redistribution are country-specific. We rely on a model of inequality and redistribution where multiple steady states can emerge in given country. We link the model to the recent literature on beliefs and argue that beliefs are a major determinant of which equilibrium results. We show that changes in beliefs may shift the equilibrium in a country over time. We present evidence that beliefs are typically very stable over time, yet argue that Brazil has recently undergone a dramatic shift in beliefs which we show is associated with a change in the country's social contract in the past thirty years. The transition from one social contract to another has taken place through a process which we call 'dissipative inclusion', where redistribution and social inclusion are effectively achieved but accompanied by distortions, inefficiencies and rent dissipation.

Notes:

Print version record

December 2012.