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
From 1961-1970
From 1971-1980
From 1981-1990
From 1991-2000
From 2001-2010
GDP Population GDP per capita
6.17
2.89
3.19
8.63
2.44
6.04
1.57
2.14
-0.56
2.54
1.57
0.95
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
-5.00
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Inequality
(Gini Index)
0.650
0.625
0.600
0.575
0.599
0.594
2001-2009: -9%
1995-2001: -1%
0.550
0.539
0.525
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
521
1995-2003: -1% a.a.
500
2003-2009: +4.8% a.a
400
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)
Years of Schooling
8.0
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
Years of Schooling
2002
2003
2004
2005
2006
2007
Poverty
Poverty rate
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
1995
1996
1997
1998
1999
2001
2002
2003
Poverty rate
2004
2005
2006
2007
2008
2009
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
2004
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%)
2009
51
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
28
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%)
BRASIL
18
Renda média:
2004 R$ 495,12
2009 R$ 634,65 (+28%)
15
Desigualdade (Gini):
2004 0.565
2009 0 538 ( 6%)
9
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%)
90
80
70
60
Milhões de pessoas
50
40
30
20
10
0
10
20
30
40
50
60
70
80
90
Regional poverty
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2003
2004
2005
South
North
2006
Southeast
2007
Northeast
2008
Midwest
2009
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
Midwest
North
2005
Northeast
2006
South
Southeast
2007
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?
Theil
H-H
Bourguignon
Expected result
Brasilia
Porto Alegre
Brasilia
Porto Alegre
Recife
Salvador
Brasilia
Sao Paulo
Against expected
Belo Horizonte
Recife
Salvador
Sao Paulo
Belo Horizonte
Sao Paulo
Belo Horizonte
Porto Alegre
Recife
Salvador
Changes in the shares of Theil-T, H-H e Bourguignon
from 1998 to 2008
Region
Belo Horizonte
Distrito Federal
Porto Alegre
Recife
Salvador
São Paulo
Dimension
Theil-T
H-H
Bourguignon
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
Belo
Horizonte
Distrito
Federal
Porto Alegre
Dimensão
Gini
Within
-5,38%
Between
-0,25%
Transvariation 5,62%
Within
-2,54%
Between
2,21%
Transvariation 0,33%
Within
-3,37%
Between
0,29%
Transvariation 3,08%
Recife
Within
-0,83%
Between
-4,70%
Transvariation 5,54%
Salvador
Within
-1,58%
Between
-2,17%
Transvariation 3,75%
São Paulo
Within
-2,21%
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
Belem
Fortaleza
Recife
Salvador
Belo Horizonte
Rio De Janeiro
Sao Paulo
Curitiba
Porto Alegre
Dustrito Federal
Var. Poverty
Growth Comp.
6.70
-0.32
0.25
-1.59
0.51
-1.25
3.60
-0.12
-0.41
3.06
Inequality Comp.
6.57
0.70
-2.24
-0.75
1.56
0.90
1.35
1.43
0.66
-0.74
0.13
-1.02
2.49
-0.85
-1.05
-2.15
2.25
-1.55
-1.06
3.80
Poverty variation, Growth and Inequality
components from 2003 -2009
Region
Belem
Fortaleza
Recife
Salvador
Belo Horizonte
Rio De Janeiro
Sao Paulo
Curitiba
Porto Alegre
Dustrito Federal
Var. Poverty
-11.46
-17.05
-14.81
-17.66
-10.11
-5.42
-6.21
-7.29
-6.10
-11.02
Growth Comp.
-7.56
-13.84
-11.62
-12.62
-7.44
-3.41
-1.98
-4.77
-2.66
-5.35
Inequality Comp.
-3.90
-3.21
-3.18
-5.04
-2.67
-2.01
-4.23
-2.51
-3.44
-5.67
Linha de pobreza R$140,00
ΔP
Linha de pobreza R$232,50
ΔP
1995-2002
2003-2009
6.70
-11.46
6.57
-7.56
0.13
-3.90
7.93
-15.22
9.08
-10.13
-1.15
-5.09
Fortaleza
1995-2002
2003-2009
-0.32
-17.05
0.70
-13.84
-1.02
-3.21
0.43
-20.41
0.65
-17.55
-0.22
-2.86
Recife
1995-2002
2003-2009
0.25
-14.81
-2.24
-11.62
2.49
-3.18
0.75
-18.76
-4.16
-15.10
4.91
-3.66
Salvador
1995-2002
2003-2009
-1.59
-17.66
-0.75
-12.62
-0.85
-5.04
-2.46
-22.36
-1.41
-17.45
-1.05
-4.90
Belo Horizonte
1995-2002
2003-2009
0.51
-10.11
1.56
-7.44
-1.05
-2.67
-1.46
-19.00
1.99
-12.69
-3.45
-6.31
Rio de Janeiro
1995-2002
2003-2009
-1.25
-5.42
0.90
-3.41
-2.15
-2.01
-0.08
-11.40
1.69
-6.84
-1.77
-4.55
São Paulo
1995-2002
2003-2009
3.60
-6.21
1.35
-1.98
2.25
-4.23
6.91
-10.07
3.54
-4.02
3.38
-6.05
Curitiba
1995-2002
2003-2009
-0.12
-7.29
1.43
-4.77
-1.55
-2.51
-0.66
-12.54
4.06
-9.07
-4.72
-3.47
Porto Alegre
1995-2002
2003-2009
-0.41
-6.10
0.66
-2.66
-1.06
-3.44
1.35
-10.53
1.62
-5.28
-0.27
-5.25
Distrito Federal
1995-2002
2003-2009
3.06
-11.02
-0.74
-5.35
3.80
-5.67
3.34
-14.29
-1.74
-9.01
5.08
-5.28
Região
Metropolitana
Periodo
Belém
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