MenezesProPoorEconomicGrowth

MenezesProPoorEconomicGrowth - 1 Has Economic Growth Been...

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Unformatted text preview: 1 Has Economic Growth Been Pro-Poor in Brazil? Why? FINAL VERSION Narcio Menezes-Filho Ligia Vasconcellos University of So Paulo 2 Executive Summary In this paper we examine whether economic growth has been pro-poor in Brazil. In order to do that we describe several indicators of the Brazilian economy, examine the variables associated with poverty levels and changes, calculate the growth-elasticity of poverty, examine the determinants of pro-poor growth in a panel of Brazilian States and investigate the possibility of trade-offs between growth and pro-poor growth. The results indicate that: 1) Growth is good for the poor in Brazil, with the evidence across states suggesting that a 10% rise in income reduces extreme poverty by about 8% on average. As in Bourguignon (2002), the growth-elasticity of poverty depends positively on the initial level of income and negatively on initial inequality. This means that poorer and more unequal states have to growth more to achieve the same level of poverty reduction. The model could predict quite well the evolution of poverty in the Brazilian states over time. 2) The micro data reveal that poverty in Brazil is associated with having children, being non-white, having less education, no access to infrastructure, being unemployed or working in an informal agricultural job. Education, access to infrastructure and sector of activity are more important in rural areas. Over time, poverty has become more common amongst the more educated and employed individuals. 3) Decomposition results suggest that the reduction of poverty in Brazil between 1981 and 2001 occurred mainly in rural areas, especially within the less educated. Poverty reduction in urban centers was mainly the result of human capital upgrade, which out-weighted the rise in unemployment and informality. 4) The Growth Incidence Curves (GIC) reveal that growth benefited most percentiles of the initial income distribution, except for those up the very bottom, but was more beneficial to those in the top, which raised income inequality. The Datt- Ravallion decompositions reveal that most of the poverty reduction was due to growth and very little due to reductions in inequality. 5) The main factors that changed initial conditions in the states and therefore raised the growth-elasticity of poverty were investments in tertiary education, reduction in the share of households with children and reductions in the white/non-white and male/female wage differentials. Regression analysis highlighted the importance of human capital and infrastructure for pro-poor growth. 6) The results of growth regressions suggest that inequality may have positive effects on growth, which means that trade offs may exist between growth and pro- poor growth. There are, however, no trade-offs associated with investments in human capital, infrastructure and with reducing the dependency ratio. 3 1) Historical Context and Growth-Poverty Trends 1.1. Historical setting for Brazils growth experience1....
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This note was uploaded on 09/30/2009 for the course INTB 3352 taught by Professor Vardy during the Spring '09 term at University of Houston.

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MenezesProPoorEconomicGrowth - 1 Has Economic Growth Been...

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