Poverty Alleviation in Brazil, 1970-87

43 Pages·2001·2.7 MB·English

-THE WORLD BANK
Internal DiscussionP aper
LATIN AMERICAA ND THE CARFBBEANR EGION
ReportN o. IDP-072
PovertyA lleviationi n Brazil,
1970-87
M. Louise Fox
July 1990
Country Operations Division Country Department I
DiscussionP apersa re not formalp ublicationso f the WorldB ank.T heyp resentp reliminarya nd unpolishedr esultso f countrya nalysiso r researcht hat
is circulatedt o encouraged iscussiona nd commentc; itationa nd the useo f sucha paper should take accounto f its provisionacl haracter.T he findings,
interpretationsa, nd conclusiones xpressedi n thisp apera re entirelyt hoseo f thea uthor(s)a nd shouldn ot be attributedi n any mannert o theW orldB ank,
to its affiliatedo rganizationso, r to memb-rso f its Boardo f ExecutiveD irectorso r the countriest hey represent.
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IDP43 'The Macroeconomicosf SocialS ecurityin Brazil: Fiscaal nd Financl ssues, DouglasP uffer(t Consultanta)n d EmmanuaYl . JimenezJ, une
1989
IDP-49 'Feeding LatinA merica'sC hildren"H, umanR esourceDs ivisionT, echnicaDl epartmenOt, ctober1 98
IDP-50 "MarginaEl ffectiveT ax Rateso n CapitalI ncomein Argentina"L, ucaB arbonea nd MichaeMl cKee( ConsultantA),u gust1 989
IDP'-53 'A Bibliographyo n Povertya nd IncomeD istributionIn LatinA merica"H, umanR esourceDs iision, TechnicaDl epartmentN, ovembe1r 989
IDP-54 "Ecuador:D evelopmenIst suesa nd Optionsf or the AmazonR egion',C ountryD epartrentI V,D ecember1, 989
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IDP-56 "RegulatinIgn dustralP olutioni n DevelopingC ountries:S omeP ossibleF rameworksP",a ulR . Porney (ConsultantD),e cember1 989
IDP-60 "Strategyfo r the Promotiono f Non-TradionaAl griculturaEl xports",M artinF . RaineD, ecembe1r 989
IDP-41 'A PortfolioM odelf or Brazil',R ul CoutinhoJ, une 1989
IDPS64 'Why TaxI ncentiveDs o NotP romoteIn vestmenint Brazil",A . Estachea ndV . Gaspar( consultantF),e bruary1 990
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IDP-69 "AllocatingC redit How to Direct,P riceo r Auction',S . RamachandranJu, ne 1990
IDP-70 'LAC Economica nd SectorW ork: A CritcalR eviewo f SelectedIs sues',L Auemheime(rc onsuttantJ),u ne 1990
IDP-71 "AgriculturaTl radeI n the CaribbeanC ommunity"J, ohn Nash,J uly 1990
IDP.72 "PovertyA lleviationin Brazil,1 970-87"M, . LouiseF ox,J uly 1990
July 18, 1990
PovertyA lleviationi n Brazil, 1970-1987
M. Louise Fox
The author is gratefult o Martin Ravalliona nd GauravD aft for their calculationso f the povertyg ap index
and the decompositiona nalysis used here,t o Nancy Birdsall,W illiam McGreeveya, nd RicardoM oranf or
their comments on an earlierd raft, and to RuthanneD uetscha nd PamelaS tedmanf or research
assistance.T he findings, interpretationsa, nd conclusionsa re the author's own. They should not be
attributed to the World Bank,i ts Boardo f Directors,i ts managemento, r any of its memberc ountries.
Tableo f Contents
PaaeN o.
Introduction.. .............................................. 1
Povertya nd PovertyL inesi n Brazil .............................. 2
The QuantitativeR ecord:P overtyR eduction1 960-1987.. ............. 7
How Economic DevelopmenAt lleviated Poverty- Evidencef rom the
1970s. ..........................................12....
How Recessiona nd AdjustmenCt hangedt he Faceo f Poverty- Evidence
from the 1980s. ....................................... 18
The NortheasRt uralP oor ..................................... 22
The UrbanP oor. ............................................ 24
FemaleH eadedH ouseholdsa nd Poverty ......................... 27
Conclusion.s. ............................................. 28
Lessonsf or the 1990s ....................................... 30
Reference.s.. ............................................. 33
DataA ppendix .................. 37
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ABSTRACT
This paper reviews the evidence on poverty alleviation in Brazil over the past
two decades. After reviewing a number of measurement issues, the paper
answers four basic questions:
(a) What do we know about the level and intensity of absolute poverty
in Brazil, and how have these variables changed over the last 20
years?
(b) What are the economic characteristicso f the poor today, and how
do they compare with the non-poor?
(c) How have these characteristicsc hanged as the economy of Brazil
has grown and changed over two decades?
(d) What can we learn from the poverty alleviatione xperience of the
last two decades about Brazil's prospects for poverty alleviation
in the 1990s?
The paper shows that during the "miracle period" the incidence and severity of
poverty declined substantially,p rimarily by moving the poor out ot
subsistence agriculture into more renumerativeo ccupations. During the
eighties, progress toward poverty alleviation slowed with the decline in
economic growth. During this period, urban poverty increased substantially,a
new trend for Brazil. Prospects for poverty alleviation in Brazil in the
1990B will depend first on the restorationo f stable economic growth, and
second on the ability of key sectors (agriculture,s ervices) to improve labor
productivity,t hus raising the incomes of the poorest. In rural areas, where
50 percent of the poor still reside, measures to raise productivitym ust
include increased access to social services.
Introduction
Economicd evelopmenst houldb e aboutr educingp overty.' Whileo vert he
past 30 years developingc ountries have experienceds ubstantiali ncome growth,
throughoutth e last two decadess ignificanftr ustrationh as beene xpresseda t the pace
of povertyr eductionw hich hasa ccompaniedth atg rowthi n somed evelopingc ountries.
In the 4970s,c oncernw as expressedth at economicg rowthw as not "tricklingd own"t o
the poor (WorldB ank,1 980). In the 1980s,m anya nalystsc laimedt hat the processo f
adjustmenfto llowingt he globalr ecessionw as actuallyim pedingp overtyr eductiona, nd
that the poor were bearingt oo manyo f the costs of adjustment( Cornia,e t al, 1987).
Brazilh as often beenc ited as an exampleo f wheret he developmenpt rocessh as not
providede noughb enefitsto the poor. Duringt he late 1960sa nd 1970s,w henB razil's
domesticp roductiong rewa t "miracle"r ates,B razil'sp rogressto wardp overtya lleviation
wasv ieweda s inadequateg ivent his potentia(l Fishlow1, 972;C henerye t al 1974;T aylor,
et al, 1980;f or a contraryv iews ee Fields,1 977). Indeeds omea uthorsc laimedt hat the
processo f economicd evelopmenbt ypassedth e poor duringt his period,l eavingt hem
"marginalizedi"n a separatee conomics ystem (Cardosoa nd Faletto,1 979;H ewlett,
1979). In the 1980s,a s Brazils truggledt o adjustt o the changingi nternationafiln ancial
environmenta, nalystsd enouncedt he effectso n poverty of the adjustmentp rocess
(WorldB ank, 1986).
The purposeo f this paperi s to reviewt he evidenceo n povertya lleviation
in Brazilo vert he last two decades. It addressesth e followingq uestions:
VWhdaot we knowa boutt he levela nd intensityo f absolutep overty
-
in Brazil,a nd how havet hese variablesc hangedo ver the last 20
years?
YWhaatr e the economicc haracteristicos f the poor today,a nd how
do they comparew ith the non-poor?
How havet hesec haracteristiccsh angeda s the economyo f Brazil
has growna nd changedo vert wo decades?
Whatc anw e learnf rom the povertya lleviatione xperienceo f the last
two decadesa boutB razil'sp rospectsf or povertya lleviationin the
1990s?
This paper is not an evaluationo f how individualp olicies affectedt he poor over the
period. Thatt opic is mucht oo broadf or this exercise2. Rathetrh e papers etst he stage
for such an analysisb y (a) resolvingc rucialm ethodologicapl roblemsa ssociatedw ith
measuringt he level of poverty at various points in time and performing this
'In a recent speech,W orld BankV ice PresidentK araosmanoglus tatedt hat povertyr eduction" . .(could) be
considereds ynonymousw ith development." (Citedi n the Salmen,1 990,p .1).
2Recentp apers addressingt he question of how specific policiesa ffectedt he poor in Brazil include World
Bank, 1988,w hich looks at social sector spendingo olicies,a nd Fox and Morley, 1990,w hich looks at the
impact of macroeconomicp olicies on the poor.
- 2 -
measuremenat;n d (b) isolatingfa ctorsa ssociatedw ith povertya t variousp ointsi n time,
thus providingg uidepointsfo r the designo f targetedp overtyp rogramsa nd indicating
whata ret he promisingp ointso f entryf or futurea nalyseso f the effectso f policieso n the
poor.
Analyzingt hese questionsfo r Brazili s not a simple exerciseo wingt o a
paucity of accessibled ata to measuret he basic poverty concepts3. As inflation
acceleratedi nto triple digits over the period, this exercise becomes even more
complicated. In this paper, we haved evotedc onsiderablee ffort to presentingd ata
whichm easuresa consistenct oncepto f povertyo vert ime. Thef irst sectiono f the paper
discussesth e conceptuaflr ameworka nd methodologyw e usedi n assemblingth e data
presentedb elow. In the seconds ection,w e presentt he quantitativee videnceo n just
how much povertyr eductiono ccurredi n Brazilo ver the last two decades,u sing the
methodologye laboratedin the first section. We compareB razil'sp overtyp erformance
with its incomeg rowth performancea, ttemptingt o isolatet he role of overalli ncome
growth in poverty alleviation. In the third section,w e begin to isolateo ther factors
associatedw ith povertyr eductionin the 19 70s,a nalyzingth e characteristicosf thosew ho
escapedp overtyo vert he decadea s well as thosew ho remainedin povertya t the end
of the decade. Nextw e turn to the 1980s,l ookinga t how the poor fared during the
adjustmenpt rocess. Wea rea blet o do this in mored eptht hanf or the previousd ecade,
as we have observationsf or a number of years, and are not forced to rely on
observationso f only the beginninga nd the end of the decade. In the final section,w e
turn to an analysiso f whatt he experienceo f the past twentyy ears impliesf or Brazil's
povertyr eductionp rospectsi n the 1990s.
Povertya nd PovertyL inesi n Brazil
Povertyis commonlyd efineda st he inabilityto obtaina n adequates tandard
of living. Whilet he concepta ppearsf airlys traightforwardit,s measuremenist inherently
controversiaal,s perceptionso f povertyh aveb eenf oundt o varyw ith culturea nd income
level (Ravallione, t al, 1990). In addition,e, venw erea consensusto be reachedo n the
precised efinitiono f an adequates tandardo f living,r arelyd o the datae xistt o adequately
comparel evelso f living betweeni ndividualsg, ivent he importanceo f factorss uch as
non-markettr ansactions(i ncludingth e distributiono f governmenst ervices)v, ariationsin
household size and compositiona nd the distribution of consumptionw ithin the
household, and short-run fluctuations in income in determiningi ndividual living
standardsT. he usualp racticei s to rely on currenth ouseholdin comeo r expenditures,
adjustedf or family size and (wherep ossible)c omposition,a s a measureo f individual
well being. Accordingly,t he poor are therefored efined Es those peoplew ho live in
3Owingt o the limitedt ime and resourcesa vailablef ort his study,o nly secondarys ources (existinga nalysis
andt abulationsw) ereu sed.B razilianh ouseholsdu rveyd atai s actuallyv eryr icha ndu nderusedb,u ta major
data analysise ffort (e.g.s everaly earsw ork) would be requiredb eforea morec omprehensivea nalysisc ould
be undertaken.
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houLseholdthsa t do not, at a givenp ointi n time, havea t their disposatl he minimall evel
of inflows( monetaryo r non-monetaryr)e quiredt o obtaina n adequateli vings tandard."
The levelo f inflcw--measureedi therd irectlyb y actuali nflow( income),o r
indirectlyb ut more reliablyb y actualo utflows( expenditures)--whicshe paratesth e poor
from the non-poori s calledt he povertyl ine. Ideally,i t is the cost, at local prices,o f a
basketo f goodsc omprisingth e absolutem inimumr equirementsn: utrition( caloriesa nd
specific nutrients), clothing, shelter, education, health care, transportation.
Conventionallyit, is the cost of a basketo f low price foods providinga n FAO/WHO
minimumc aloricl evelp lus an allowancefo r non-foode xpendituresm, easureda t local
cost. This implies that the measuremenot f poverty should also take into account
regionald ifferencein consumptionh abitsa nd prices. In order to get a more accurate
measuireo f non-monetaryin flowsi n the form of government-providesdo cial services,
measureso f povertyb asedo n incomeo r expendituresp er capita are conventionally
combinedw ith outcome measureso f physicalw ell-being( mortality,m orbidity, and
nutritionasl tatus)a nd educationle vel.
Once the poor have been distinguishedf rom the non-poor, it is also
importantt o analyzet he severityo f poverty,m easuringt he shortfallb etweene ach
individual'sc onsumptiona nd the minimums tandard. In evaluatingp overtya lleviation
overt ime, it is importantt o know not just howt he numbero f poor has changed,b ut by
how much. If the number of poor has remainedc onstantb ut the averagel evel of
deprivationh as increasedt,h e resultc ould not be considereda welfarei mprovement.
The simple measureo f the proportionates hortfallo f the averagep oor persona nd the
povertyl ine (or, the differenceb etweent he povertyl ine and the mean incomeo f the
poor),i s knowna s the incomeg ap ratio.A measurew hichi ncorporatesb oth the depth
of povertya nd the number of poor is the averagep overtyg ap, which is simply the
producto f the headcounot f povertya nd the incomeg ap ratio. The povertyg ap is one
of the most widely usedm easureso f the changei n povertyo vert ime5.
Evenm eetingt he agreed" common piactice"c onventionsfo r measuring
povertyd escribeda bovei s difficulti n Brazil. Only one nationale xpenditures urveyh as
been undertakeni n the last two decades,i n 1974/75. Householdi ncome data are
collected in yearly sample surveys,w hich appear to do a reasonablej ob of measuring
4For lacko f betterd ata,s tudieso f povertyin Brazilh aveu sedi ndividuael arningsa s a proxyf or individual
levelso f living (Lewhig,( 1988);J atoba,( 1989);R omao,( 1988);D enslowa nd Tyler,( 1983)). This can be very
misleading,a s individualsv ary in the numbero f peoplew ith whom they share their income. A low income
earneri s often a secondarye arneri n a high incomeh ousehold,a llowingt he achievemento f a much higher
standardo f living than the individuali ncome could support on its own. Likewise,a middle Incomee arner
may be supportinga very large householda s sole earner,i mplyinga much lower standardo f income than
if the individualw ere living on his/hero wn. In 1985,r oughly3 5 percent of those earninga t the minimum
wage in the formal sector were secondarye arnersi n householdsw ith per capita incomes in the top 50
percent of the distribution,( Alemeidad os Reis,1 989). For this reason,i t is extremelyi mportantt o analyze
povertya t the level of the consumptionu nit, and to controlf or the size (and if possible,t he composition)
of this unit.
5SeeF oster La, 1984,f or a discussiono f this issue and exampleso f other measures.
-4 -
monetaryla bori ncome. Incomec overageis supposedt o be betteri n the dataf rom the
decadal censuses,b ut comparisonw ith natioriala ccountsd ata suggestso therwise
(CEPAL1, 986).A s workingw ith rawd atai s a veryc ostlyp rocess,m ostr esearcherrse ly
on publishedta bulationso f surveyd ata. Until1 980,o fficialp ublishedta bulationsd id not
allow the identificationo f the poor by householdin comec ontrollingf or households ize
(e.g. per capita),a nd no official publishedt abulationsh ave controlledf or household
composition( e.g.b y adult equivalent).E vens ince1 980,s ucht abulationso nly existf or
selected years, and none exist controlling for household composition. Few
characteristicso f householdsw ith low per capita incomes are published. As the
publishedt abulationsa lso do not includet he meansb ut only the frequencyw ithint he
intervals,e stimatingt he intensityo f povertyi s difficult as well. Brazil is an extremely
complexc ountry, and regional price and consumptiond ifferencesa re knownt o be
significant( Rochaa nd Tolosa, 1989; Thomas, 1982). This implies that separate
minimums tandardso f incomes houldb e definedf or each area( at eacht ime period),
but to do so would required ata on consumptiona nd the evolutiono f pricesf or each
area. For most of the country,t his detailedd ata is completelyu navailable. Finally,
Brazil'sh igha nd variablei nflationw reaksh avocw ith any effortst o measurec hangesi n
real variables. This is especiallyt rue after 1985,w hen the combinationo f rapidly
acceleratingin flationa nd periodicp ricef reezesb roughtw ide swingsi n relativep rices
from montht o month.
Givent hese data limitationsw, e proceededa s follows. Throughoutt he
paper,t he poor are defineda s those personsl iving in a householdw hosei ncomep er
capitai s belowa minimuma cceptables tandard6. Incomei s measuredb y household
surveys,w hich only record about 50 percent of the nationala ccountse stimateso f
income.W henc omparedw itht he 1974/75e xpenditured ata,w hichw as ablet o pick up
about8 0 perc ento f nationala ccountsd ataf or the samep eriod,t heses urveyd atah ave
beens hownt o underestimatein come-in-kindw, hich primarilya ffectst he measurement
of householdin comei n the rurala reas,a lthoughm anyu rbanf amilyb usinesseas lsot ake
some income in kind7. Thus,t he populationi n povertyi n rural areas is likely to be
overestimatedre lativet o the urban populationf or any given poverty line when the
households urveyd ata is used.
The absenceo f regionalp rice series outsideo f the metropolitana reas
leavesn o othero ptiont han to definea nationalp overtyl ine,d espitet he distortionst his
approache ntails. We originallys oughtt o definea povertyl ine basedo n the price of a
minimum basketo f commodities. The cost of such a basket has been estimated
nationwidea nd for 21 regions using the 1974/75e xpenditured ata. The cost of the
basketr angedf rom 4 to 10 percento f the minimumw agep er capita( usinga n average
family size of 5.5) (Thomas,1 982). Usingt he samed ata,j ust under3 0 percento f the
6This is equivalentt o assumingt hat all household members have equal needs,a nd that there are no
economieso f scale in householdp roduction.
"is it usuallya ssumedt hat both expenditured ata and income data do a poor job of recordingi ncomef rom
capital,b ut the poor havev ery little of this type of income,s o this data omissioni s not of as much concern
as the others noted above.
populationw ere found to be living under the povertyt hreshold. Howeverw, hen we
inflatedt he August1 974c ost of the averagem inimumb askett o 1980p rices( usingt he
IGPd eflator),t he resultingp overtyl ine rangedf rom 67 to 91 percento f the minimum
wagep er capita,a nd placedr oughly6 0-70p ercento f the populationin povertyi n 1980.8
Thea pparenti ncreasei n the povertyp opulationb etween1 974a nd 1980i s accounted
for in part by the greateri ncomec overageo f the expenditures urvey,a nd highlightsth e
problemsi n usingt he householdin comed ata. Neverthelessm, ost observerso f Brazil
in 1980w ould find the notiont hat 70 percento f populationw ere unablet o purchasea
minimums tandardo f living an exaggerationo f the extento f poverty. From a policy
perspectives, uch a povertyl ine is alsot oo high,a s it does not allows ufficienfto cuso n
the neediesto f the population.
Castinga bout for a differentp overtyl ine for Brazil we found that most
authorsh aveu sed a multipleo f the minimumw age. Fishlow( 1972),i n his pioneering
study of povertyi n Brazil, used I minimumw agef or an averagep oor rural family (6
personsi n 1960)a s his povertyl ine, and adjustedt his line upwardsb y 15 per centf or
urban areas. Most authorsw ho participatedin the great Brazil povertya nd income
distributiond ebate of the 1970sf ollowedt his approach,i ncludingF ields (1977)a nd
Beckermanna nd Coes (1980). Pastore,( 1983)i n his comparisono f 1970a nd 1980,
used 1/4 of a 1980m inimumw age per capitaa s his povertyl ine, as did Hoffmana nd
Kayagama(,1 986). While minimumw age policy has serveda numbero f purposesi n
Brazil,t he originall egislationr equiredt he wage levelt o be at leaste qualt o the cost of
a basicn eedsc onsumptionb asket( a cestab asica),a ndt hus there is somej ustification
for using a multipleo f the minimum wage as a "normative"p overty line, reflecting
Brazilians tandards. In this paper,w e continuet he traditiona nd use a multipleo f the
minimumw agea s our povertyl ine, recognizingth at any povertyl ine has an elemento f
arbitrariness.
As our basic povertyl ine, we will use the Pastoree t al estimateo f the
minimumn ecessaryin comef or Brazil:1 /4o f the 1980m inimums alaryp er capita( inr eal
terms for successivey ears). Unlesss tatedo therwisien t ableso r int he text,t his will be
the povertyli neu sed. In some cases,w e could not transforme xistingd ata into this
format. In thesec ases,w e describet he relationshipb etweenth e incomec onceptsu sed
and our own povertyl ine. In 1985,o ur basic povertyl ine translatesin to an incomeo f
roughly$ 200p er year,o r about1 3 percento f GDPp er capita.T his povertyl ine is about
"These resultsa re slightlyh ighert han the Hicksa nd Vetter( 1983)r esultsf or 1980a nd the Rochaa nd Tolosa
(1989)r esultsf or 1981. Hicks and Vetteru sed an FGVf ood basketa nd priced it for 1974a nd for 1980f or
25 metropolitana reas. They estimatedp er capitap overtyl inesf or 1980r angingf rom over8 0 percento f the
minimumw age in the high priced cities of the Northwestt o 56 percent of the minimum wage in Rio de
Janeiro,w ith price changesr anging from 790 to 1080p ercent, comparedw ith the 1080p ercent recorded
in the broader cost of livingi ndex we used. Rocha and Tolosat ook a consumptionb asket estimatedb y
Fava, (calculatedu singt he same data as Thomasb ut with a differentm ethodologyr esulting in a slightly
higherp riced basket)a nd repricedi t separatelyf or 10 urbana reas. Theyf ound the cost of the itemsr anged
from 75 to 43 percent of a minimums alary per capita. Both results indicatet hat the cost of items in the
consumptionb asketo f the poor in most metropolitana reasd id not rise as fast between1 974-81a s the cost
of Items in the broader price index we used. In the 1980s,a narrowerc ost of living index, using a basket
of Items consumedb y lower income households( the INPC), is availablea nd was used in this study.