the determinants of the sharp improvement in income distribution in brazil

The determinants of the sharp improvement

in income distribution in Brazil

Brasília, 27 March 2012

Republic of Uganda Delegation Visit

Ricardo Paes de BarrosRosane Mendonça

Raquel Tsukada

1. Evaluating the magnitude of the decline in poverty and

inequality

22.1

22.6 22.9

17.317.7 17.8

16.817.4 17.4

16.5

17.5

15.1

13.3

10.810.3

8.8 8.4

5

7

9

11

13

15

17

19

21

23

25

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Pe

rce

nta

ge

of

the

po

pu

lati

on

be

low

th

e e

xtr

em

e p

ov

ert

y l

ine

Evolution of extreme poverty rate in Brazil: 1990-2009

Millennium Development Goal for 2015

Real Plan

Cardoso Lula

8

9

10

11

12

13

14

15

16

17

18

19

20

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pe

rce

nta

ge

of

the

po

pu

lati

on

be

low

th

e e

xtr

em

e p

ov

ert

y l

ine

Evolution of extreme poverty in Brazil: 1999-2009

Extreme poverty in 2001


4.0

9.1

Reduction in extreme poverty necessary to achieve the MDG by 2015

Total reduction in extreme poverty


8

9

10

11

12

13

14

15

16

17

18

19

20

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Pe

rce

nta

ge

of

the

po

pu

lati

on

be

low

th

e e

xtr

em

e p

ov

ert

y l

ine

Evolution of extreme poverty in Brazil: 1999-2009



4.0

Poverty evolution without growth

Reduction in extreme poverty due to the reduction in inequality

9.1

5.5

Reduction in extreme poverty necessary to achieve the MDG by 2015

Total reduction in extreme poverty


0.582

0.589

0.594

0.588

0.596

0.587

0.599

0.615

0.634

0.612

0.580

0.602

0.599

0.600

0.600

0.598 0.592 0.594

0.587

0.581

0.5690.566

0.560

0.552

0.544

0.5390.53

0.54

0.55

0.56

0.57

0.58

0.59

0.60

0.61

0.62

0.63

0.64

0.65

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Gin

i c

oe

ffic

ien

t

Evolution of the degree of inequality in per capita income: Brazil, 1995-2009

0

1

2

3

4

5

6

7

8

9

First Second Third Fourth Fifth Sixth Seventh Eighth Ninth Tenth

An

nu

al g

row

th r

ate

(%

)Average annual growth rate in per capita income by tenths of the

distribution: Brazil, 2001-2009

Average

Top 10%

Bottom 10%

-5

-3

-1

1

3

5

7

9

11

13

15

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Av

era

ge

an

nu

al g

row

th r

ate

(%

)

Distribution of countries (%)

Distribution of countries according to the average per capita GDP growth rate between 1990 and 2005

Brazilian top 10%

Brazilian bottom 10%

China

Germany

Haiti

2. Expansion of opportunities

0 10 20 30 40 50 60 70 80 90 100

Infant mortality (first year)

Child mortality (up to 5 years)

Neonatal mortality

Postneonatal mortality

Postinfant mortality (1 to 5 years)

Infant mortality at the end as a percentage of the initial level

Reduction in infant mortality adjusted for inequality of opportunity: Brazil 1996-2006

Reduction to a 1/3 in 25 years

Reduction to 1/2 in 25

years

Slower than required by the

MDG

Faster than required by the

MDG

ReductionRemaining level of mortality

2006 1996

0 10 20 30 40 50 60 70 80 90 100

Prenatal care

Postnatal care

Malnutrition, stunting: height for age

Malnutrition, wasting: weight for height

Malnutrition, underweight: weight for

age

Malnutrition and lack of access to basic heath at the end as a percentage of the initial level

Reduction in malnutrition and lack of access to basic health services: Brazil, 1996-2006


years

Reductionto 1/2 in 25

years

Reduction

Remaining deficits

2006 1996


MDG


MDG

0 10 20 30 40 50 60 70 80 90 100

Child labor (10-14 years olds)

Not attending school (5-6 years olds)



Has not completed forth grade at age 11

Has not completed eighth grade at age 15

Has not completed eighth grade at age 16

Has not completed secondary school at age 18

Educational deficit at the end as a percentage of the initial level

Reduction in educational deficit adjusted for the inequality of opportunity: Brazil 1999-2009

Reductionto a 1/3 in 25 years


years

Reduction

Remaining educational deficit

19992009


MDG


MDG

0 10 20 30 40 50 60 70 80 90 100

Adequate access to information

Lack of adequate acess to water

Lack of adequate acess to sanitation

Lack of adequate acess to water and sanitation

Deficit in access to information, water and sanitation at the end as a percentage of the initial level

Reduction in deficits in access to information, water and sanitation adjusted for the inequality of opportunity:

Brazil 1999-2009

Reduction to a 1/3 in 25

years

Reduction to a 1/2 in 25 years

Reduction

Remaining deficit in access

19992009


MDG


MDG

3. Immediate Determinants

wuoay .. per capita

income

Percentage of adults

Non labor income per adult

Percentage of adults working

Labor income per adult working

4. The Contribution of the Brazilian Transfer Programmes

I. Bolsa FamíliaConditional cash transfer programme to poor families,

conditional on children attending school and health care visitsSmall per capita transferNumber of beneficiaries in 2009: 13 millions families (around 35

million individuals)Annual expenditure in 2009: R$ 10 billions (0,4% do PIB)

Brazilian Income Transfer Programmes

II. Pension to Poor Elderly or Disabled People (BPC)Income transfer to poor elderly (> 64) and disabled people One minimum wage transferNumber of beneficiaries in 2009: 3,5 millionAnnual expenditure in 2009: R$ 18,7 billions (0,6% do PIB)


III. Rural Pension Income transfer to rural poor old peopleOne minimum wage transferNumber of beneficiaries in 2009: 8,1 millionsAnnual expenditure in 2009: R$ 44 billions (1,7% do PIB)


0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

0 10 20 30 40 50 60 70 80 90 100

pe

rce

nta

ge

percentiles of the distribution

Distribution of Bolsa Família beneficiaries by percentile of the distribution of per capita income: Brazil

Source: Estimates based on Pesquisa Nacional por amostra deDomicílios (PNAD) from 2004 to 2008 and Encuesta de Hogares, Panama, 2008 and CASEN, Chile, 2003.Note1: The per capita income that defined the hundreths of population excludes the income of the benefit.Source: Estimates based on Pesquisa Nacional por amostra deDomicílios (PNAD) from 2004 to 2008 and Encuesta de Hogares, Panama, 2008 and CASEN, Chile, 2003.Note1: The per capita income that defined the hundreths of population excludes the income of the benefit.

Red de Oportunidades - Panama

Bolsa Família

SUF - Chile

Oportunidades

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

0 10 20 30 40 50 60 70 80 90 100

pe

rce

nta

ge

percentiles of the distribution

Distribution of Bolsa Família beneficiaries by percentile of the distribution of per capita income: Brazil

Source: Estimates based on Pesquisa Nacional por amostra deDomicílios (PNAD) from 2004 to 2007.

2007

2004

6

Targeting solely based on municipal cotas proportional to poverty

19,8

32,0 33

Determinants of Bolsa Família targeting

Targeting mechanism

Percentage of the benefits going to families

with per capita income below R$120

Without any targeting mechanism (random allocation)

Contribution (%)

55,0

57,1

Random selection from the Cadastro Único

Targeting using the information on income from Cadastro Único

62

Gini coefficient

Percentage of poor

(P0)

Poverty gap (P1)

Poverty severity (P2)

Percentage of extremely

poor (P0)

Extreme poverty gap

(P1)

Extreme poverty

severity (P2)

Total transfers 49 42 51 57 52 66 79

Public transfers 49 41 50 57 51 67 82

Pensions and retirement benefits 28 30 25 22 22 19 18

Benefício de Prestação Continuada (BPC) 10 6 9 11 7 14 19

Bolsa Família 13 3 15 25 19 39 57

Income sources

Source: Estimations produced based on the Pesquisa Nacional por Amostra de Domicílios (Pnad) 2001 and 2007.

The contribution of transfers to the recent decline in income inequality and poverty: Brazil, 2001-2007

0

5

10

15

20

25

30

35

40

45

50

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75

Pe

rce

nta

ge

of

the

po

pu

lati

on

be

low

th

ee

xtr

em

e p

ov

ert

y l

ine

Age (years)

Extreme poverty by age: Brazil, 2009

Average including transfers

Excluding public transfers

Including public transfers

Continuity of results, not necessarily of policies

0

2

4

6

8

10

12

14

16

18

20

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75

Pe

rce

nta

ge

of

the

po

pu

lati

on

be

low

th

ee

xtr

em

e p

ov

ert

y l

ine

Age (years)

Extreme poverty by age after transfers: Brazil, 2009

Average

5. The Productive Inclusion of the Poor

Absolut (R$/month)

Relative (%)

Annual growth rate (%)

Income per capita (R$/month) 62 100 39 63 8,4

Percentage of adults (%) 55,0 58,0 3,0 5,5 0,9

Non work-related income per adult (R$/month) 25 49 25 100 12,3

Work-related income per adult (R$/month) 87 123 35 40 5,8

Percentage of the family income originated from work (%)

78,0 71,0 -7,0 -9,0 .....

Income per capita if only work-related income had grown (R$/month)

..... 81* 19 31 4,7

Source: Estimates obtained from the household survey Pesquisa Nacional por Amostra de Domicílios (PNAD) in 2003 and 2009.

Note: * Income per capita if w ork-related income w ere as of 2009, all else constant, in 2003 values.

Table 1: Characteristics of the income growth of the 20% poorest: Brasil, 2003-2009

Indicator 2003 2009

Variation

The Productive Inclusion of the Poor

Brazil has demonstrated a significant capacity of promoting the productive inclusion of its most vulnerable segments.

Conditions for a successful productive inclusion: Availability of good opportunities Guarantee for effective access Protagonism

For the effective eradication of extreme poverty is necessary that both private and public sectors contribute as much as possible to the productive inclusion of the low-income population.


The public sector must complement the initiatives implemented by the private sector to generate productive opportunities in communities with less-dynamic economies: Direct creation of productive opportunities Legislation, supervision and tripartite agreements Promotion of the local economy

Regarding the vital role of public policies: it is important to guarantee that the poorest workers will have effective access to the available productive opportunities.

Providing information about locally available opportunities Training and overcoming discrimination Guaranteeing minimum conditions


6. The magnitude of the economic crisis in Brazil and the nature of the

adjustment process in the labor market

120

125

130

135

140

145

150

3rd quarter 4th quarter 1st quarter 2nd quarter

REal

GD

P (1

995=

100)

Real GDP: Brazil, 2008 and 2009

Current

Previous year

Average of three previous years

2008 2009

110

115

120

125

130

135

140

3rd quarter 4th quarter 1st quarter 2nd quarter

REal

GD

P (1

995=

100)

Real GDP - Secondary sector: Brazil, 2008 and 2009

Current

Previous year

Average of three previous years

20092008

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

11,0

12,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Acc

umul

ated

job

crea

tion

(mill

ions

)

Accumulated net creation of formal jobs:Brazil, 2000-2010

-500

-450

-400

-350

-300

-250

-200

-150

-100

-50

0

50

100

150

200

October November December January February March April May June July August September

Diff

eren

ce in

job

crea

tion

(tho

usan

d jo

bs p

er m

onth

)

Monthly job net creation relative to the average for the previous five years: Brazil, 2008-09

2008 2009

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

80

100


Diff

eren

ce in

job

crea

tion

(tho

usan

d jo

bs p

er m

onth

)

Monthly job creation relative to the average for the previous five years: Brazil , 2008-09

Primary

Secondary

Superior

2008 2009

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500


job

crea

tion

and

des

truc

tion

(th

ousa

nd jo

bs p

er m

onth

)

Monthly job creation and job destruction: Brazil, 2008-09

Creation

Destruction

2008 2009

Strategic Themes - SSAEERRADICATION OF EXTREME POVERTY VIA MOST EFFECTIVE USE OF EXISTING POLICY AND SOCIAL PROGRAMS

PROMOTION AND CONSOLIDATION OF A PRODUCTIVE AND DYNAMIC NEW MIDDLE CLASS, RISK-FREE OF RETURNING TO POVERTYOPORTUNITY FOR A FULL AND COMPREHENSIVE DEVELOPMENT IN EARLY CHILDHOOD

OPORTUNITIES FOR A HEALTHY AND PRODUCTIVE TRANSITION TO ADULT LIFE

SOCIAL, SPATIAL AND SYMBOLIC INTEGRATION IN LARGE CITIES

HOW TO DEVELOP A NATIONAL SYSTEM OF EVALUATION OF PUBLIC POLICY

FORMULATING STRATEGIES FOR INCLUSIVE DEVELOPMENT WITH STATES

STRESSING THE PROMOTION OF PRINCIPLES IN THE DESIGN OF SOCIAL POLICIES WITHOUT LIMITING THE RESULTS

the determinants of the sharp improvement in income distribution in brazil

Technology