Inequality and Economic Development in Brazil is part of the World Bank Country Study series. These reports are published with the approval of the subject government to communicate the results of the Bank's work on the economic and related conditions of member countries to governments and to the development community. Excessive income inequality is unfair and undesirable on ethical grounds and can bring adverse effects on economic growth, health outcomes, social cohesion, and crime. Excessively unequal initial conditions are likely to lead to a perverse cycle of weak social mobility. Such is the case in countries like Brazil, where fertility differentials between educated and uneducated mothers are much greater. Brazil's income inequality has been very high and persistent over time, and has deep historic roots. Nonetheless, there have been important income improvements for the poorest, especially since stabilization in 1993. Brazil also has achieved major improvements in social indicators in the last few decades. This study addresses three questions: - Why do inequalities matter for Brazil's development? - Why does Brazil occupy a position of very high inequality in the international community? - What should public policy do about it?