Interregional and intersectoral income distribution between Salvador and the rest of Bahia

Abstract

This paper investigates the economic interdependence between the city of Salvador, adjacent municipalities, and the rest of the State of Bahia. The analysis is centered on the application of Miyazawa’s extended input-output model. The impacts of transfers to the income deciles in each division of the state were estimated. We used the Population Arrangement of Salvador Input-Output Matrix for 2015, organized by Haddad et al. (2020b), as well as microdata from the 2017/2018 Brazilian Household Budget Survey and the Demographic Census - 2010. The results suggest that few sectors participate in inter-industry trade between the capital and the rest of the arrangement, and between the arrangement and the rest of Bahia. Transfers to families outside the capital have the potential to generate the greatest gains for the state’s economy. However, such induced effects end up being larger for the wealthiest families in Salvador, reinforcing local/regional inequalities within Bahia. The results are important for understanding historical income inequalities in the state of Bahia, in addition to the possibility of proposing new regional economic planning policies.