| Summary: | Abstract This research seeks to analyze the impacts of economic growth and income inequality on Brazilian states’ urban and rural poverty, considering the effects of the initial levels of development and inequality. The elasticities of income and inequality of poverty were calculated through a dynamic spatial panel, using an adaptation of the approach developed by Kalwij and Verschoor (2004), and data from 2004 to 2014. Incorporating the spatial factor allows us to capture the effects of the geographical location on local poverty. The results suggest that a poverty reduction occurs more intensely when associated with reductions in the inequality levels. Income elasticities were greater (in absolute terms) in rural areas, while the inequality elasticities were greater in the urban area estimates. The growing trend of the inequality elasticity and the decreasing trend of the income elasticity suggest a positive trend of economic growth and a negative trend of poverty. Likewise, if the reduction in inequality shows a negative trend, the absolute value of poverty will decrease. Thus, a public policy to combat poverty through economic growth or reducing inequalities applied to the urban or rural environment would obtain more efficient results if applied in the long term.
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