The Dynamics of Poverty and Inequality in the Six Main Metropolitan Regions of Brazil A Decomposition Analysis Dr. Izete Pengo Bagolin PUCRS Brazil (Rodrigo Assis and Douglas Carneiro Graduate Students)
Structure of the presentation Introduction Motivations and regional diversity Facts and controversies about Brazilian Development Decomposition Analysis Inequality Poverty
Average GDP, Population and GDP per capita growth (%) Período GDP Population GDP per capita From 1961-1970 6.17 2.89 3.19 From 1971-1980 8.63 2.44 6.04 From 1981-1990 1.57 2.14-0.56 From 1991-2000 2.54 1.57 0.95 From 2001-2010 3.61 1.21 2.37
Inflation in the eighties and early nineties 3000.00 2500.00 2000.00 1500.00 1000.00 500.00 0.00 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Inflation in late nineties and during the two thousand 25.00 20.00 15.00 10.00 5.00 0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-5.00
Inequality (Gini Index) 0.650 0.625 0.600 0.575 0.599 1995-2001: -1% 0.594 2001-2009: -9% 0.550 0.525 0.539 0.500 0.475 0.450 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Fonte: Pesquisa Nacional por Amostra de Domicílios, 1995-2009. Exclusive área rural da Região Norte (exceto Tocantins).
Household Income (per/head) (R$ September, 2009) 700 637 600 500 400 521 1995-2003: -1% a.a. 2003-2009: +4.8% a.a 300 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Fonte: Pesquisa Nacional por Amostra de Domicílios, 1995-2009. Exclusive área rural da Região Norte (exceto Tocantins). Real Growth 1995-2009: +22.4%
Years of Schooling (country average) 8.0 Years of Schooling 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1990 1992 1993 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 Years of Schooling
Poverty 40.00 Poverty rate 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 Poverty rate
Number of People living below the poverty line (millions) 70,000,000.00 60,000,000.00 50,000,000.00 40,000,000.00 30,000,000.00 20,000,000.00 10,000,000.00 0.00 2002 2003 2004 2005 2006 2007 2008 2009
Number of People living with cash transfer -bolsa família (millions) 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2004 2005 2006 2007 2008 2009 2010 2011
Poor people in Brazil NÃO POBRES renda per capita R$ 465 ou mais 51,3 + 26,6 = 77,9 milhões em 2009 Renda média: 2004 R$ 1.207,99 2009 R$ 1.189,32 (-2%) 51 2004 2009 78 VULNERÁVEIS renda per capita R$ 134 a R$ 465 82,0-1,2 = 80,8 milhões em 2009 Renda média: 2004 R$ 267,49 2009 R$ 278,82 (+4%) 82 81 POBRES renda per capita R$ 67 a R$ 134 28,2-10,8 = 17,5 milhões em 2009 Renda média: 2004 R$ 101,61 2009 R$ 104,04 (+2%) EXTREMAMENTE POBRES renda per capita até R$ 67 15,0-6,3 = 8,7 milhões em 2009 Renda média: 2004 R$ 101,61 2009 R$ 104,04 (+2%) 28 15 90 80 70 60 50 40 30 20 10 0 10 20 30 40 50 60 70 80 90 Milhões de pessoas 9 18 BRASIL Renda média: 2004 R$ 495,12 2009 R$ 634,65 (+28%) Desigualdade (Gini): 2004 0.565 2009 0 538 ( 6%)
Regional poverty 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2003 2004 2005 2006 2007 2008 2009 South North Southeast Northeast Midwest
Years of Schooling (average by region) 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2003 2004 2005 2006 2007 Midwest North Northeast South Southeast Brazil
What the government says? Around 63% of the reduction in poverty and inequality are due to improvements in the labor market economic growth From that, 30% are due to human capital improvements and the other from minimal wage increases Only a very small percentage is due to cash transfers programs
What the critics and academia say? The Bolsa família is the main responsible - poverty in Brazil is just hidden. The decrease in inequality is stopping and maybe even already starting to increasing again. Growth will stop soon and we are going to new stage of stagnation. The quality of education is decreasing and we have people that are functionally illiterate.
Departing from this controversy we are trying to address the following questions: What is the dynamic of the decrease in income inequality? - How the components of the inequality indexes are changing? Which component is reducing? Which is increasing? - How the variations in poverty rates relater to growth and Inequality?
Brazilian Data (Surveys) For the inequality decomposition (With Rodrigo Assis) PED monthly/yearly household sample since 1988 only for the six main metropolitan regions. For the Poverty decomposition (Douglas Carneiro) PNAD yearly household sample State and metropolitan level (for the whole country) Alternatives sources Census - each ten year; POF Yearly household sample MDS
The Inequality Indexes we are using The Theil-T and the Hirschman-Herfindhal (H-H) indexes are more sensitive to changes in income in the upper tail, causing greater variation in Theil-T and HH index when there are changes in higher incomes. The Bourguignon Index becomes more sensitive to changes in the lower tail of the distribution, which means that changes in the income of the poorer has greater impact on the inequality index. The Gini Index possesses the characteristic of giving greater importance to average incomes than for the extremes of the distribution. By using the concept of mean difference, the difference in income between all pairs of the distribution, the Gini coefficient is also known as the weighted sum of the ranking of rents in the population. Therefore, the index becomes more sensitive to variations in the center of the distribution.
Average Inequality by index
Average income by region
Year of Schooling - average
Inequality Decomposition Theil, HH, Bourguignon Gini - traditional and Dagun Decomposition What we are expecting? More inequality between groups and less inequality within groups Fall in the share of inequality within groups Increase in the share of inequality between groups. And when we are talking about Gini we expect that the residual (or transvariation) also decrease.
What we have? Higher inequality within groups Smaller Inequality between groups
How the shares changed over the time for Theil-T, HH and Bourguignon? Expected result Against expected Theil H-H Bourguignon Brasilia Porto Alegre Belo Horizonte Recife Salvador Sao Paulo Brasilia Porto Alegre Recife Salvador Belo Horizonte Sao Paulo Brasilia Sao Paulo Belo Horizonte Porto Alegre Recife Salvador
Changes in the shares of Theil-T, H-H e Bourguignon from 1998 to 2008 Region Dimension Theil-T H-H Bourguignon Belo Horizonte Distrito Federal Porto Alegre Recife Salvador São Paulo Within 0,58% 0,78% 0,47% Between -0,58% -0,78% -0,47% Within -2,59% -2,31% -2,01% Between 2,59% 2,31% 2,01% Within -0,96% -0,48% 1,46% Between 0,96% 0,48% -1,46% Within 2,66% -0,42% 5,39% Between -2,66% 0,42% -5,39% Within 1,36% -0,58% 1,43% Between -1,36% 0,58% -1,43% Within 0,39% 1,22% -0,05% Between -0,39% -1,22% 0,05%
How about the Gini Decomposition? Inequality Between Groups is the highest, followed by transvariation and smallest part is inequality within groups. Within Between Transvariation Expected All regions Brasilia Porto Alegre 0 Against expected 0 Belo Horizonte Recife Salvado Sao Paulo All regions
Região Dimensão Gini Within -5,38% Belo Between -0,25% Horizonte Transvariation 5,62% Within -2,54% Distrito Between 2,21% Federal Transvariation 0,33% Within -3,37% Porto Alegre Between 0,29% Transvariation 3,08% Within -0,83% Recife Between -4,70% Transvariation 5,54% Within -1,58% Salvador Between -2,17% Transvariation 3,75% Within -2,21% São Paulo Between -1,95% Transvariation 4,15%
Poverty Decomposition Proportion of poor people (P0) Shapley Decomposition Poverty variation is decomposed in: Growth component Distribution component
The components The effect of the growth component shows the variation in average income when the income distribution keeps unchanged. The effect of redistribution is represented by change in the levels of income distribution while the growth in unchanged.
The results When the growth component is negative it means the growths contributed to poverty reduction. Likewise, when the redistribution component is negative the fall in income inequality resulted in a decrease in poverty.
What we got? From 1995-2002 there was no patters among the regions and the redistribution component explained more the variations. From 2003-2009 all regions reduced poverty and the growth component contributed more to explain the variations.
Poverty variation, Growth and Inequality components from 1995-2002 Column1 Var. Poverty Growth Comp. Inequality Comp. Belem 6.70 6.57 0.13 Fortaleza -0.32 0.70-1.02 Recife 0.25-2.24 2.49 Salvador -1.59-0.75-0.85 Belo Horizonte 0.51 1.56-1.05 Rio De Janeiro -1.25 0.90-2.15 Sao Paulo 3.60 1.35 2.25 Curitiba -0.12 1.43-1.55 Porto Alegre -0.41 0.66-1.06 Dustrito Federal 3.06-0.74 3.80
Poverty variation, Growth and Inequality components from 2003-2009 Region Var. Poverty Growth Comp. Inequality Comp. Belem -11.46-7.56-3.90 Fortaleza -17.05-13.84-3.21 Recife -14.81-11.62-3.18 Salvador -17.66-12.62-5.04 Belo Horizonte -10.11-7.44-2.67 Rio De Janeiro -5.42-3.41-2.01 Sao Paulo -6.21-1.98-4.23 Curitiba -7.29-4.77-2.51 Porto Alegre -6.10-2.66-3.44 Dustrito Federal -11.02-5.35-5.67
Região Metropolitana Belém Fortaleza Recife Salvador Belo Horizonte Rio de Janeiro São Paulo Curitiba Porto Alegre Distrito Federal Periodo Linha de pobreza R$140,00 ΔP Linha de pobreza R$232,50 ΔP 1995-2002 6.70 6.57 0.13 7.93 9.08-1.15 2003-2009 -11.46-7.56-3.90-15.22-10.13-5.09 1995-2002 -0.32 0.70-1.02 0.43 0.65-0.22 2003-2009 -17.05-13.84-3.21-20.41-17.55-2.86 1995-2002 0.25-2.24 2.49 0.75-4.16 4.91 2003-2009 -14.81-11.62-3.18-18.76-15.10-3.66 1995-2002 -1.59-0.75-0.85-2.46-1.41-1.05 2003-2009 -17.66-12.62-5.04-22.36-17.45-4.90 1995-2002 0.51 1.56-1.05-1.46 1.99-3.45 2003-2009 -10.11-7.44-2.67-19.00-12.69-6.31 1995-2002 -1.25 0.90-2.15-0.08 1.69-1.77 2003-2009 -5.42-3.41-2.01-11.40-6.84-4.55 1995-2002 3.60 1.35 2.25 6.91 3.54 3.38 2003-2009 -6.21-1.98-4.23-10.07-4.02-6.05 1995-2002 -0.12 1.43-1.55-0.66 4.06-4.72 2003-2009 -7.29-4.77-2.51-12.54-9.07-3.47 1995-2002 -0.41 0.66-1.06 1.35 1.62-0.27 2003-2009 -6.10-2.66-3.44-10.53-5.28-5.25 1995-2002 3.06-0.74 3.80 3.34-1.74 5.08 2003-2009 -11.02-5.35-5.67-14.29-9.01-5.28
Concluding remarks The decrease in inequality - increased the proportion of inequality that is not related to education. Inequality was more important to explain poverty variation before the cash transfer program (bolsa família). Growth is explaining poverty reduction in the second part of the period.
Thank you! Izete