Alston, Lee J. <br/><br/>
Changing Social Contracts:  Beliefs and Dissipative Inclusion in Brazil / 
Lee J. Alston, Marcus Melo, Bernardo Mueller, Carlos Pereira. 
 - Cambridge, Mass.  National Bureau of Economic Research  2012. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w18588 .
 - Working Paper Series (National Bureau of Economic Research)  no. w18588. .
<br/><br/> December 2012. 
<br/><br/> 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. 
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