INEQUALITY IN MINAS GERAIS, BRAZIL: A STUDY CASE ON

ZONA DA MATA REGION

Rosa Fontes 1
Patrcio A. S. Carneiro 2
Roberto Santolin3
ABSTRACT
The main objective of this paper is to show that although the Zona da Mata region in
Minas Gerais is located in a more developed part of the country, it presents a serious
inequality problem that negatively affects regional development. Results indicate that
there has been a conditional income -convergence in Zona da Mata towns, with these
economies moving to different steady state positions inside the region, because of their
different structural characteristics.
Key Words: Inequality, Convergence, Brazil

1. INTRODUCTION
The Brazilian economy has one of the highest income inequality indexes in the
world. Paes de Barros et al. (2000) say that the average income taken by the 10% richest
people in Brazil is 28 times higher than the average income taken by the 40% poorest
people. On the other hand, this statistics for Costa Rica is 13 times, for Argentina is 10
times and 5 times for France.
The unequal income distribution that is increasing since the 60s occurs because the
Brazilian growth was not able to benefit all classes. While the 10% richest people have
48% of total income, the 10% poorest survive with only 0,8% of total income.
This inequality problem arises also in state and regional income analysis. Minas
Gerais is a rich state with 300.000 km2 located at the Southeast developed part of
Brazil. It is divided into 12 regions1, 66 counties and 853 towns and it is responsible for
10% of Brazilian GDP. It presents social and economic heterogeneity with dynamic
regions characterized by high industrialization rates and per capita income and poor
regions with high illiteracy rates and poverty.While the Metropolitana de Belo
Horizonte e Sul/Sudoeste de Minas regions in 2000 were responsible for 54% of state
GDP, Jequitinhonha, Vale do Mucuri and Norte de Minas regions had only 7% (FJP,
2003).
Zona da Mata is also a heterogeneous region. It is located next to So Paulo, Rio de
Janeiro and Belo Horizonte triangle, as shown in Figure 1. It has 2 million people in a
35.726 km2 area, with 7 microregions and 142 towns.
1

Full Economics Professor at Universidade Federal de Viosa - Minas Gerais - Brazil, Ph.D. in
Economics from NCSU-USA(1988) and Visiting Scholar at University of California-Berkeley(1993-94)
and at Ludwig Maximiliams Universitat-Munich (2000-2001). E-mail: rfontes@ufv.br
2
Geography Lecturer at Universidade Federal de Viosa - Minas Gerais - Brazil. E-mail: patricio@ufv.br
3
Economics Graduate Student at Universidade Federal de Viosa Minas Gerais Brasil and Lecturer
at Universidade Presidente Antnio Carlos. E-mail: r_santolin@yahoo.com.br.

North
Northeast

Center-West
City of Belo Horizonte
Southeast

Zona da Mata Region

Cityof Rio de Janeiro

South
200

200

Cityof So Paulo

400 Miles

Data: GEOMINAS (1996)

Figure 1.Brazilian Regions and Zona da Mata Region

Carneiro and Fontes (2005) show that the best Zona da Mata social economic
indicators are concentrated at some towns in the south microregions (as Juiz de Fora)
while at the north and northeast microregions there are several towns(as Viosa, Ponte
Nova and Manhuau) with low per capita income, high illiteracy rates, poverty, rural
population and high income concentration.
Based on that, this paper intends to analyse the inequality behavior within the Zona
da Mata microregions and towns from 1970 to 2000 to show that there are strong
internal disparity that ends up inhibiting regional growth. After this introduction, next
section presents the methodology used. The main results are shown at part 3 and section
4 concludes.

2. METHODOLOGY
The tests proposed by Barro and Sala-I-Martin (1992), Quah (1993) and Drennan e
Lobo (1999) are used to investigate municipal and microregional inequality in Zona da
Mata region, Minas Gerais State, Brazil.
-convergence (Barro and Sala-I-Martin, 1992)
In analyses with cross-section data, the -convergence hypothesis is traditionally
tested by a simple linear regression model where the per capita income growth rate is

estimated compared to the initial per capita income of the region, by the Ordinary Least
Squares method. The basic equation of this test is expressed by:

1 y i ,T
ln
T y i ,0

1 2 ln y i ,0 i

where yi,0 and yi,T represent the per capita income of the initial and final periods,
respectively; T corresponds to the number of years between the initial and final periods
of the sample observation; i is the random error.
The left-hand side of equation (1) corresponds to the per capita income growth rate. A
negative correlation between the growth rate and the initial per capita income (2<0)
indicates that there is absolute -convergence2.
One of the problems with the absolute -convergence test is that regression (1) assumes
that all the geographic units under analysis have the same level of per capita income in
a steady state and that the differences observed in the levels of current per capita
income are due only to short term deviations in the stock of per capita physical capital
of the regions compared to their level in a steady state. However, the regions may
present differences in terms of human capital and other geographic, structural and
institutional characteristics that affect the income level in the steady state.
Consequently the estimates of equation (1) are biased due to the omission of relevant
variables to explain the regional growth rates.
When equation (1) is modified to include other regional characteristics important in the
economic growth dynamic, the absolute -convergence gives way to the conditional convergence. This hypothesis means that each region has its own level of per capita
income in steady state, determined by its peculiarities in terms of preferences and
technologies, and that per capita income of a region tends to grow more quickly the
farther it is from its level of steady state. Equation (2) is the base for the conditional convergence test:

1 yi ,T
ln
T yi ,0

1 2 ln yi ,0 X i

(2)

where X represents a vector of regional variables relative to the stock of human capital
and other geographic, structural and institutional characteristics. These variables are
generally included in its value at the start of the sampling periods.
Conditional -convergence is indicated by a negative ratio between the per capita
income growth rate and its initial value (2<0), after controlling the regional differences
in terms of the variables included in X (with 0). It is emphasized that the occurrence
of conditional -convergence does not mean that the regional inequalities in terms of
per capita income are being reduced or that they tend to disappear over time (Sala-iMartin, 1996). On the contrary, it means that the economies tend to a situation of
equilibrium in the long term where, because they present different steady states, the
regional disparities will persist. The regions with a low stock of human capital, for
example, should present a low level of per capita income in the steady state compared
to the regions with a high stock of human capital.

-convergence test
-convergence consists of observing the dispersion of the GDP per inhabitant in the
towns of each group, in successive years. The sufficient condition of -convergence
is that a fall is detected in this dispersion. -convergence can be tested by the
coefficient of variation analysis (C.V.), given by the ratio between the standard
deviation and the arithmetic mean of the GDP per inhabitant of the towns. Zero values
for C.V. mean perfect equality in the income distribution among the regions.
Drennan and Lobo test (1999)
The test for -convergence (absolute) proposed by Drennan and Lobo (1999)
consists of testing the hypothesis of independence between two events, A and B, that are
defined in function of the initial per capita income and its growth rate. The conditional
probability of occurrence of event B is given by:
p P( B | A)

P( B A)
P( A)

(3)

The events A and B are independent when P(B/A) = P(B).

A Z test is performed on the following hypotheses about events A and B:
H0: P(B|A) = P(B)

(4)

Ha: P(B|A) P(B)

(5)

The Z statistic of the test is calculated by:

Z

P( B | A) P( B)

(6)

where: p is the conditional probability, =P(B) and is the standard error of the
proportion given by:

p(1 p)
n

(7)

where: n is the number of observations.

Event A depends on the ratio average between the per capita income of the
microregion (or town) and the per capita income of the state in period t. The result A1
is observed when this ratio is less than one and the result A2 when the ratio is greater
than one. That is,
A1 :

A2 :

Yi ,t
YMG,t
Yi ,t
YMG,t

(8)

(9)

where Yi represents the per capita income of the microregion (or town) i; YMG is the
per capita income of Minas Gerais state.
Event B depends on the ratio between the per capita income growth rates of the
microregion (or town) and the state per capita income growth rate between the periods t
and T (T>t). This event presents the result B1 when the ratio is less than one, or the
result B2 when the ratio is greater than one. That is,

B1 :

Gi
1
G MG

(10);

B2 :

Gi
1,
G MG

(11);

where Gi is the per capita income growth rate of the microregion (or town) i; GMG is the
state per capita income growth rate.
The absolute convergence hypothesis establishes that the economies with per capita
incomes lower than the mean state income would grow at greater rates than the set of
the whole state, while economies with per capita income greater than the state mean
would grow at lower rates than the state. The conditional probability test is applied to
four possible results:
B1A2: regional income growth lower than that of the state income growth, and initial
regional income greater than the state income.
B2A1: regional income growth greater than that of the state income growth, and initial
regional income less than the state income.
B2A2: regional income growth greater than the state income growth, and initial regional
income greater than the state income.
B1A1: regional income growth less than the state income growth, and initial regional
income less than the state income.
If the hypothesis of independence between the events A and B is rejected, there will
be evidence in favor of the -convergence hypothesis. To the contrary, this hypothesis
is rejected.
Quah (1993) test
Quah (1993) proposed a new approach to analyze the process of per capita income
convergence, using models of probability based on Markov chains. The geographic
units are classified in K strata of per capita income and the performance of per capita
income of the regions is described by an infinite sequence of vectors of state
probabilities p(0), p(1),...,p(t)..., and a matrix of transition probabilities among states
(M). A vector of state probabilities (p(t)) represents the distribution of regions among
the income strata, that is, a component of the vector p(t) represents the probability p i(t)
of a region belonging to the income strata i in period t, where ipi=1. The elements of
the transition probability matrix (M) indicate the probability mi(t) of a region belonging
to income strata i period t changing to income strata j in period t + 1, where imij=1
(that is, the sum of the elements of a line from M is equal to 1).

A Markov chain describes a stochastic process for discrete and finite cases (in the
present context, the income strata), with the property that the probability of changing
from one state (income strata i) to another state (income strata j) in the next period is
independent from how the chain reached the current state. That is, the percentage
distribution of the regions among the income strata at a determined point of time only
depends on the same distribution in the immediately previous period.
Assuming that the transition probabilities do not change over time and ordering them
as a matrix transition of K order, we have
p(t+1) = p(t)M = p(0)Mt

(12)

where: p(t) is a vector line 1 x k whose elements are the probabilities pi(t) and Mt is the
product of t identical M matrixes.
An important aspect in income convergence analysis is the long-term performance of
the regional per capita income distribution. Assuming that, after many periods, the
vector of state probabilities p(t+1) is equal to the vector p(t) and also independent from
the initial state vector p(t). This vector would be, thus, a long-term equilibrium vector,
that can be called vector of probabilities in steady state, p. That is, the steady state
vector (if it exists) is the vector p so that:
p = pM

(13)

The vector p (1 x k) characterizes the probable long-term distribution of the interregional per capita incomes and does not depend on the initial distribution of the
regions among the income strata but depends only on the transition probabilities matrix.
Once the M matrix has been found, the distribution limit of the regional per capita
incomes is the vector p that solves the expression (4), with the additional restriction that
the sum of the components of vector p is equal to 13.
A crucial step to implement the Quah test is to obtain the transition probabilities
matrix, M. However, it is pointed out that the choice of the number of income strata is
arbitrary and that the results may be sensitive to the M matrix used. Quah (1993)
considered five relative income stratas (k = 5). Ferreira (1999) performed two exercises
using data from Brazilian states, using k = 5 and k= 6 , corresponding to relative income
strata.
Data Procedures
A data set from Zona da Mata 7 microregions and 142 towns was constructed. The
maps were done with the Geographical Information System(GIS), software Arc View.
For the convergence tests the following data were obtained at Fundao Joo Pinheiro:
per capita GDP in 1985 and, from 1990 to 2000, average per capita family income,
inequality Theil-L index and average schooling years of population above 25 years for
1980 and 1991. Per capita GDP was deflated with 2002 IGP-DI .

3. MAIN RESULTS
-convergence test (Barro and Sala-i-Martin, 1992)
The first analysis was made from the absolute income -convergence test and, later,
from the conditional income -convergence test. These linear regression tests proposed
by Barro and Sala-i-Martin (1992) were performed for the Zona da Mata municipalities
in the period from 1980 to 2000.
The analyses were implemented in the periods 1985/90 and 1991/00 for the absolute
income -convergence hypothesis. The conditional income -convergence hypothesis
test was divided into two stages because of the lack of homogeneous data for the period
in question: in the first stage, the performance of Zona da Mata economy was studied
by the per capita family income from 1980 to 1991; while in the second stage, the
analysis was performed taking the per capita GDP from 1991 to 2000 as the variable.
The regression analyses were then divided into four Models. Models 1 and 2 showed
the relationship between the dependent variable per capita growth rates and the
explained variable initial per capita GDP for the periods 1985/90 and 91/00,
respectively. Models 3 emphasizes the relationship between the variables presented in
Model 1, with the addition of the explained variables mean of years of study of the
population over 25 years of age, representing human capital, and the degree of
inequality in the period 1980/91. Model 4 shows the relationship among the variables
presented in Model 2, and the explained variables mean of years of study of the
population over 25 years of age, representing human capital, and the degree of
inequality in the period 1991/00 were also added.
Therefore Models 1 and 2 correspond to the absolute income - convergence test,
while Models 3 and 4 show the conditional income - convergence test. Tables 1 and 2
show, respectively, the results of the regression for the Zona da Mata towns from
1985/00, corresponding, respectively, to Models 1 and 2.
Table 1 -absolute income convergence test for Zona da Mata towns, 1985/90
Dependent =Per capita family income growth rate
Explained= Per capita family income in 1985
________________________________________________
Obs. = 129
Coefficient = -0.212646
Standart Deviation = 0.632185
T test = -0.336367
F test= 11.31
Significance = p-value < 1%
R2 = 0.745711
_______________________________________________

Table 2 -absolute income convergence test for Zona da Mata towns, 1991/00
Dependent =Per capita GDP growth rate
Explained= Per capita GDP in 1991
_______________________________________________
Obs. = 129
Coefficient = -0.375251
Standart Deviation = 0.557175
T test = -0.673489
F test = 45.36
Significance = p-value < 1%
R2 = 0.239313
_______________________________________________

The period from 1985/90 and 1991/00 presented a negative and significant ratio, at the
level of 1%, between the dependent variable per capita income growth rate and the
explained variable income per capita. This result suggests that there was an absolute
-convergence process in the municipalities in the Zona da Mata from 1985 to 2000.
The identification of a negative relationship between initial per capita and growth rate
implies that the poorer economies tend to grow faster than the richer ones, because the
concept of absolute -convergence denotes the existence of a single steady state which
all tend towards. Thus, the further an economy is from the steady state, the greater will
be its growth rate. The fast growth of the poorer economies would be explained by their
lower stock of capital and income per capita level. Tables 3 and 4 show, respectively,
the results of regression for the Zona da Mata towns, from 1980 to 2000, corresponding
to Models 3 and 4.
Table 3 - -conditional income convergence test for Zona da Mata, 1980/91
Dependent= Per capita family income growth rate (1980/91)
Explained= Per capita family income (1980)
Average schooling years of population above 25 years (1980)
Inequality index (1980)
Obs. = 126
________________________________________________________
Coefficient
S. Deviation
T
Signif.
Income
Education
Inequality
Constant

-0.105455
0.133308
-0.163501

0.301443
0.404537
0.172931

-0.349833
0.329531
-0.945469

0.0002
0.0005
0.1722

-0.127079

F test= 10.65
Significance = p-value < 1%
R2 = 0.20754
_________________________________________________________

Table 4 - -conditional income convergence test for Zona da Mata, 1991/00

___________________________________________________________
Dependent= Per capita family income growth rate (1991/00)
Explained= Per capita family income (1991)
Average schooling years of population above 25 years (1991)
Inequality index (1991)
Obs. = 142
___________________________________________________________
Coefficient
S. Deviation
T
Signif.
GDP
Education
Inequality
Constant

-0.593842
0.170003
-0.854762

0.118402
0.571805
0.265608

-0.501549
0.297309
-0.321813

0.0001
0.0015
0.0006

0.119519

F test= 23.81
Significance = p-value < 1%
R2 = 0.3411
____________________________________________________________
The analyses performed for the period 1980/91, the variable mean of the years of
study of the population over 25 years old with more than 11 years of study showed a
positive and significant relationship with the per capita family income growth rate.
This, in turn, presented a negative and significant coefficient at 1%, compared to the
dependent variable per capita family income growth rate, signaling the occurrence of
conditional income -convergence. The degree of inequality did not show a significant
coefficient for the variable per capita income growth rate. Thus it can be stated that
from 1980/91 the educational variable exercised a very important influence on the
growth rate of the per capita family income while the inequality in this period was not
expressive in interfering in the income growth rate.
Regarding the period from 1991 to 2000, the per capita GDP variable, similarly as
was reported for the period 1980/91, also presented a negative and significant
coefficient at 1% compared to the dependent variable per capita GDP growth rate,
confirming the occurrence of conditional income -convergence in this period.
The inequality indicator, by indicating negative and significant coefficient at 1% for
the per capita GDP growth rate, suggested that the highest growth rates for per capita
GDP were in those towns with the lowest inequality indicators.
The educational variable, represented by means of years of study of the population
over 25 years of age, presented again positive and significant coefficient at 1% in
comparison to the per capita GDP growth rate and confirmed the hypothesis that higher
levels of schooling should give the municipalities higher per capita GDP growth rates.
The indication of a negative relationship between initial per capita family income and
per capita family growth rate from 1980 to 2000 shows that the conditional income convergence process is occurring in the Zona da Mata towns, pointing to the hypothesis
that these economies have different steady states. These different steady states would
be the results of various geographic, structural and institutional characteristics of the
municipalities that affect income level. This fact suggests that the poor economies
would not be growing faster as shown in the absolute -convergence process.

The regression results for the Zona da Mata towns suggest that from 1980 to 2000
there was an income -convergence process. Tables 3 and 4 confirm the conditional convergence hypothesis for the process in the Zona da Mata municipalities, in function
of the importance of the variables represented by the education and inequality
indicators. The growth of the initial per capita income generally showed a decline in its
growth rate throughout the period and was accompanied by an increase in inequality,
mainly in the period 1991/00.
These results show that economic growth alone could not lead to income convergence
in Zona da Mata towns, so other variables such as education and inequality should be
controlled for more rapid equalization of the region. Therefore the Zona da Mata towns,
in maintaining these conditions, would be moving to different steady states.
Drennan and Lobo (1999) test
The present test was carried out for the Zona da Mata microregions and, later, for their
component towns, using the per capita GDP data from the period 1985 to 2000.
Drennan and Lobo (1999) used the absolute -convergence test to test the hypothesis
of independence between two events defined in function of the initial per capita income
and its growth rate. This hypothesis, as explained previously, suggests that the
economies with per capita incomes lower than the mean region income would grow at
higher rates in the set of the region. On the other hand, economies with greater per
capita incomes than the region means that they would grow at lower rates than the
region.
Table 5 shows the results of this test for the Zona da Mata microregions. The
situation appears critical, because five of the seven microregions in the Zona da Mata,
Viosa, Manhuau, Muria, Ponte Nova and Ub not only had a per capita GDP lower
than the state mean in 1985 but they also showed a per capita GDP growth rate lower
than the state mean in the period from 1985 to 2000. This group corresponds to the
microregions that were initially poor and that, diverging from the state income growth
rate, could become even poorer. Only the microregions of Cataguases and Juiz de Fora
had a per capita GDP superior to the state mean in 1985, but, on the other the hand,
they also had a per capita GDP growth rate lower than the state mean in the period
stated, showing that although these microregions had converged to the mean, this
convergence was downwards, because they grew less compared to the state mean.
Table 5 - Drennan and Lobo test for Zona da Mata microregions, 1985/00
Microregion
Viosa
Manhuau
Muria
Ponte Nova
Ub
Cataguases
Juiz de Fora

1985/2000
B1A1 *
B1A1 *
B1A1 *
B1A1 *
B1A1 *
B1A2 **
B1A2 **

* Regional income growth rate less than state average growth rate and initial regional
income less than state income.** Regional income growth rate less than state average
growth rate and initial regional income more than state income.

Table 6 shows the results of the Drennan and Lobo (1999) test for the Zona da Mata
towns along with the number of occurrences and the significance of each event. In
contrast, Figure 2 shows the spatial distribution of each event.
Table 6 Number of occurrences of each event of Drennan and Lobo (1999) test in
Zona da Mata region, 1985/00.
B1

B2

(Per capita income

growth rate less than
region average,
1985/2000)

(Per capita income

growth rate more than
region average,
1985/2000)

Total

A1
(Per capita income
less than region
average in 1985)

67

35

102

(Per capita income

more than region
average in 1985)

26

27

Total

93

36

129

A2

The B1A1 event predominated in Zona da Mata region, representing, according to

Table 6, 52% of the number of occurrences in Zona da Mata towns. This is an
aggravating situation, because these municipalities had lower per capita income than
the state minimum in 1985 and per capita income growth rates lower than the state
mean in the period 1985/2000. This group represents the towns that were poor initially
(1985) and in the period 1985/2000 diverged from the state income growth rate and
became poorer.
On the other hand, only one town (Rodeiro) had per capita income superior to the
state mean in 1985 and had per capita income growth rate superior to the state mean in
the period 1985/2000, representing the B2A2 event.
A positive situation was shown by the municipalities in the B2A1 event. In this event,
27% of the towns had per capita income lower than the state mean in 1985, but
presented per capita income growth rates superior to the state mean in the period
1985/2000. Although the municipalities in the B1A2 event, 20% of the total, showed
per capita incomes superior to the state mean in 1985, the growth rate of their per
capita income in the period 1985/2000, because it was lower than the state mean, may
have signaled a convergence of these municipalities to the state mean, to a more inferior
position when compared to that of 1985.

Generally, it can be stated that the B1A1 economies, representing 52% of the total,
diverged downwards. If this tendency persists, these municipalities will maintain the
relative underdevelopment over time, reproducing the serious problems of inequality in
the region, because although the test showed a -convergence among the municipalities
of the region, this convergence was not absolute, but conditional, that is, it did not affect
all the towns.
Table 7 shows the probability of occurrence of each event, in the period analyzed, in
the Zona da Mata towns. From the probabilities described for each group, the
hypothesis test was formulated on the independence between the income growth rate in
the period and the initial income for the municipalities. Table 8 highlights the
hypotheses to be tested for the groups, the probability of the conditional event taking
place, the probability of the event regarding the performance of the growth rate
occurring, the value of the standard error and the statistic of the Z test for the parameters
quoted.

Table 7: Probability of occurrence of each event in Zona da Mata towns

A1
A2
Total

B1

B2

Total

0.5194
0.2016
0.7209

0.2713
0.0078
0.2791

0.7907
0.2093
1.0000

In function of the value found for the Z test statistics, the hypothesis of independence
between the per capita GDP growth rate of the towns in the period 1985-2000 and the
state per capita GDP was rejected for all the four tests in Table 8, in favor of the convergence hypothesis. Thus, the test suggests the occurrence of income convergence for Zona da Mata towns in the period considered, but this convergence did
not guarantee a reduction in the inequality in the per capita incomes.

Table 8: Independence test between Zona da Mata towns per capita GDP growth rate
in 1985-1995 and Zona da Mata towns per capita GDP in 1985
H0
P(B1/A1)=P(B1)
P(B1/A2)=P(B1)
P(B2/A1)=P(B2)
P(B2/A2)=P(B2)

0.7209
0.7209
0.2791
0.2791

0.0433
0.0172
0.0433
0.0172

-1.5327*
14.5561**
1.5327*
-14.5561**

P
0.6569
0.9630
0.3431
0.0370

Obs. * and** means significant at 10% e 1%.

Starting from the assumption that most of the Zona da Mata municipalities did not
accompany the income convergence process, a fact shown in Figure 2, it is plausible,
therefore, to state that this convergence, when it takes place, occurs conditionally
because it affects selectively some towns. In this context, the importance of the state is
emphasized as a possible long-term configuration for the economies in the Zona da
Mata municipalities, seeking evidence of a long-lasting tendency of this movement.

Figure 2 - Drennan and Lobo (1999) test for da Zona da Mata towns, 1985/00.

N
W

E
S

Drennan e Lobo
B1A1
B1A2
B2A1
B2A2

20

20

40 Kilometers

Data: FJP (2003)

-convergence test
The -convergence test is associated with the evolution of per capita income dispersion
by assessing some indicators, such as the coefficient of variation (ratio between the
standard deviation and the arithmetical mean of the per capita incomes of the
municipalities). In function of the lack of homogeneous data for the study period
(1970-2000), the -convergence analyses were carried out in two stages. In the first
stage, the dispersion of the values of the per capita family income was tested in the
period from 1970 to 1991; while in the second stage the dispersion of the per capita
GDP values was tested in the period from 1992 to 2000. Tables 9 and 10 show the 1st
and 2nd stages of the tests, respectively.

Table 9 - -convergence test using per capita family income in Zona da Mata towns,
1970 to 1991.

Years

Coefficient of Variation

1970

0,389

1980

0,371

1991

0,378

Number of observations= 126

Table 9 shows that from 1970 to 1991 there was a sign of income -convergence in the
1970s, in the sense of approximation of the per capita family income to the state mean,
while in the 1980s this movement was shown, to a lesser degree, in the opposite
direction. Thus if in the 1970s there was a reduction in regional inequality, in the 1980s
inequality, not only continued but worsened slightly.
Regarding the period 1990 to 2000, the income -convergence hypothesis was not
valid, because performance with the gradual reduction of the coefficient was not
observed, but many alternate variations. When the extreme years (1990 and 2000) were
compared it was inferred that there was a deepening of the inequalities in the region,
because the year 2000 presented the greatest coefficient of variation and also the worst
level of inequality.
The results of the study showed that the inequalities in municipal income in the Zona
da Mata decreased in the 1970s, while in the 1980s it was maintained. In the 1990s,
there was no tendency to an income equalization process in the region because the
dispersion of the coefficient of variation, in a sense of deepening the inequalities, was
far superior to that of the previous decade.

Table 10 - -convergence test using per capita GDP for Zona da Mata towns, 1990 to
2000.

Years

Coefficient of Variation

1990

0,423

1991

0,409

1992

0,484

1993

0,438

1994

0,382

1995

0,397

1996

0,395

1997

0,387

1998

0,382

1999

0,403

2000

0,569

Number of Observations = 129

Quah Test (1993)

This test permits to study of the economies performance in the long-term, analyzing
whether the difference would tend to be maintained or be overcome.
The data used were the per capita GDP of the municipalities for the years 1985 to
2000. Five per capita income strata were adopted corresponding to Very Poor (below
40% of the mean), Poor (between 40% in 80% of the mean), Medium (between 80%
and 120% of the mean), Rich (between between 120% and 160% of the mean) and Very
Rich (over 160% of the mean). The results of the Quah (1993) test for the Zona da
Mata towns are shown in Table 11, while Figure 3 and 4 show, respectively, the spatial
distribution of the different income strata in the Zona da Mata municipalities from 1985
to 2000.

Table 11 Distribution of income according to Quah test for Zona da Mata towns,
1985 and 2000.
Income
classification

Limits of

Number of towns

per capita income

1985

2000

Very poor

Below 40% of region

average

14

Poor

40% to 80 % of region
average

69

79

Medium income

80% to 120% of region

average

31

32

Rich

120% to 160% of region

average

11

Very rich

More than 160% of region

average

Number of Observations=129

The joint analysis in Table 11 and Figures 3 and 4 show that the towns are concentrated
mostly in the poor and medium per capita income strata. In 1985, 78% of the
municipalities were concentrated in these strata, while in 2000 the value had increased
to 86% of the total of towns, showing a tendency of re-concentration in this strata. This
strong clustering occurred mostly from the migration of municipalities from the very
poor to the poor strata.

Figure 3 -Per capita income classification according to Quah test for Zona da Mata
towns in 1985.
N
W

E
S

Key
Very poor
Poor
Income average
Rich
Very rich

20

20

40 Kilometers

Data: FJP (2003)

In spite of the decrease in participation in the very poor strata during the period, that
could signal a tendency of reduction in the income inequality among towns by their
convergence, there was marked dispersion of the very rich strata, in a divergent
movement compared to the others. The municipalities that in 2000 were representatives
of the very rich income strata, Oliveira Fortes, Patrocnio do Muria, Pedro Teixeira,
Rodeiro, Silvernia and Vieiras were classed in 1985, respectively, in the income stratas
Poor, Poor, Medium, Medium, Poor and Medium. On the other hand, the municipalities
of Cataguases, Juiz de Fora, Leopoldina and Santos Dumont that in 1985 formed the
very rich income strata, had passed in 2000, respectively, to the income stratas Rich,
Rich, Medium and Rich.

Figure 4 - Per capita income classification according to Quah test for Zona da Mata
towns in 2000.

N
W

E
S

Key
Very poor
Poor
Income average
Rich
Very rich

20

20

40 Kilometers

Data: FJP (2003)

In the micro regional environment, most of the municipalities of the central and
northern area of the Zona da Mata, represented by the micro regions of Viosa, Ponte
Nova and Manhuau seem to be moving to an income steady state below the state mean,
because of the unfavorable situation of the municipalities compared to the state set.
However, some isolated municipalities in the Central southern area seem to be moving
to a steady state characterized by income superior to the state mean. In this last case,
the strong economic concentration of income by the richest municipalities, inserted in a
divergent movement compared to the region, signals a obstacle to overcoming the
differentials in Zona da Mata.
Table 12 presents the probability of changing groups for the municipalities. Of the very
poor municipalities, 21% remained stagnant, 64% became poor and 14% became
medium income and there were no changes in the other stratas. The group of poor
municipalities changed least, with 80% of the municipalities remaining, that also
indicated stagnation in these economies. Of the rest, 13% became medium and 3% and
4% obtained a performance superior to that of the state and became rich and very rich,
respectively. Of the medium municipalities, 39% declined economically and became
relatively poor, 41% remained in the initial position, 10% became rich and 10%
performed exceptionally, becoming very rich. This group presented the greatest
flexibility for change among the groups, and their municipalities were distributed

among four income strata throughout the period. Of the group of municipalities that
were considered rich in 1985, 9% remained in the same position, 65% converged to the
mean and 25% became poor. Regarding the group of the initially very rich, 25%
converged to the state mean, 75% became rich and no municipality continued very rich.
The probability vector in steady state of the Zona da Mata towns is shown in Table 13,
and presents the supposed configuration of these municipalities in the long-term, if the
same tendency of the study period continues. The results reported do not indicate the
existence of absolute conversions among municipalities in the long-term but rather a
greater amplification of the disparities in the Zona da Mata region. Thus in the long
term the permanence of the difference among the income groups is observed, and there
may be conditional but not absolute convergence.

Table 12. State changing probability matrix of Zona da Mata towns, 1985-2000.
States

1985

1
2
3
4
5

1
0.21
0.00
0.00
0.00
0.00

2000
3
0.15
0.13
0.41
0.64
0.25

2
0.64
0.80
0.39
0.27
0.00

4
0.00
0.03
0.10
0.09
0.75

5
0.00
0.04
0.10
0.00
0.00

Table 13. Probability vector in steady state for Zona da Mata towns.
Income
Classification

Number of towns

Limits of per capita income

1985

2000

Long Run

Very poor

Below 40% of region

0.11

0.02

0.00

Poor

40% to 80 % of region

0.535

0.61

0.61

Medium income

80% to 120% of region

0.24

0.25

0.25

Rich

average
120%
to 160% of region

0.085

0.07

0.09

Very rich

average
More than 160% of region

0.03

0.05

0.05

1.00

1.00

1.00

average

Sum

It seems Zona da Mata region is moving to a long-term configuration where the

income differences would be maintained among municipalities. Above all, poverty
tends to remain permanent in the region. If the same economic growth character that
occurred between 1985 to 2000 is sustained, the same quantity of poor municipalities
will be observed in theaverage
long-term. Actions would thus be necessary that can intervene
in this tendency to maintain disparity among the economies, especially for the
municipalities that tend to remain relatively poorer.
average

4. FINAL CONSIDERATIONS
The present article aimed to demonstrate that the Zona da Mata region of Minas Gerais,
in spite of its position of economic importance in the state, has shown strong internal
contrasts, where income inequality, aggravated by internal heterogeneities, is one of the
main obstacles to regional development.
The municipal income inequalities in Zona da Mata decreased in the 1970s, but in the
1980s and 1990s they were maintained and deepened, respectively.
The results show that there was a conditional income -convergence process in the Zona
da Mata towns, that did not affect all the municipalities. This statement corroborates the
hypothesis that these economies have different steady states as the result of their diverse
geographic, structural and institutional characteristics. Thus economic growth in itself
would not be able to reduce the income inequalities in some municipalities in the region
because other variables, such as education and inequality, should be controlled for more
rapid equalization.
In the central and northern part of the region, represented by the microregions of
Viosa, Ponte Nova and Manhuau, most of the municipalities seem to be moving to a
steady state of income lower than the state mean, a reflection of their unfavorable
situation compared to the state and the region. On the other hand, some isolated
municipalities in the central southern area signal a movement towards a stationary state
characterized by income superior to the state mean. This divergent inter-regional
movement represents a big obstacle to overcoming the income differences in Zona da
Mata.

6. FOOTNOTES
1. Minas Gerais state has the following geographical regions: Campo das Vertentes,
Central Mineira, Jequitinhonha, Metropolitana de Belo Horizonte, Noroeste de Minas,
Norte de Minas, Oeste de Minas, Sul/Sudoeste de Minas, Tringulo Mineiro/Alto
Paranaba, Vale do Mucuri, Vale do Rio Doce and Zona da Mata.

2 1

e T
T .

2. The convergence speed () is obtained from the expression

Therefore
the calculated in this way should be interpreted as an approximation, because the
relationship between 2 and is not linear.

3. The vector p corresponds to the eigenvector associated to the eigenvalue 1 of the

matrix M. Because it is a probability vector, it should be normalized so that the sum of
its components is equal to 1.

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