Inequality in Brazil: measurement, trends, impacts and policies - - PowerPoint PPT Presentation

Inequality in Brazil: measurement, trends, impacts and policies

Marcelo Neri Strategic Affairs (SAE/PR) and EPGE/FGV

Wider, Helsinki, September 2014

Script

• Overview: The Middle Path
• Inequality: Trends, Causes and Impacts

–Per Capita Household Income - Various Surveys –Interactions with Growth, Perceptions & Assets –Residential Capital & Personal Income Tax (PIT)

• Public Policies Agenda: Bolsa Família (CCT)

US China Brazil Russia India 1 10 20 30 40 50 60 70 80 90 100

Percentile of the World Income Distribution

1 25 50 75 100

Each Country

Source: Milanovic (2011)

Income Distribution Relative to the World

Brazilian Per Capita GDP (PPP) is 93.7% of the World GDP in 2012

Source: Milanovic (2011) and Neri (2011)

Brazil is a small World

1950 1960 1970 1980 1990 2009 2011 2000 2001

Year Gini Coefficient

.75 .65 .55 .45 0.535 0.581 0.589 0.607 0.527 0.539 0.594

China Effect Chindia Effect

Inequality Across Nations Brazilian Per capita GDP PPP has grown 3.5% agains 3.6% of the world between 2002 e 2012 Falling in Brazil but still the 18th highest in 155 countries.

Inequality Within Municipalities

Gini Index of Per Capita Income by Municipality - 2000

Source: Demographic Census/IBGE microdata

2000

2010

Inequality within Municipalities

Inequality fell in 80%

• f the 5500 Brazilian

Municipalities

Gini Index of Per Capita Income by Municipalities - 2010

Source: Demographic Census/IBGE microdata

% Population with Income Below U$ 1.25 per day PPP

Source: IPEA / SAE from PNUD

Brazil: Middle of the World

Source: IPEA / SAE from the Demographic Census/IBGE

% Population with Income Below U$ 1.25 per day PPP

A World within Brazil

Component that Explains

Proportion of Extremelly Poor

% of Total Fall (69.3%)

Income growth

50.5%

Inequality Fall

49.5%

Total

100

Dynamic Decomposition of Extreme Poverty Fall of 69.3% in Brazil

Between 2002-2012

Source: IPEA/SAE from PNAD/IBGE microdata

What explains + Social Inclusion? Growth or + Equity?

The Middle Path 1st MDG: Extreme Poverty Line (U$S 1,25 a day PPP) fell 69% in 10 years

Brazil Main Target

New Middle Class: Evolution of Economic Classes Pyramid

2003 - 2014 A to E Classes

2003 2012 2014* Classe C Classes DE Classes AB

Source: CPS/FGV from PNAD/IBGE microdata * Forecast

97.8 Million 63.5 Million 54.2 Million 68.5 Million 110.5 Million 118.9 Million 14.1 Million 25.1 Million 29.5 Million

C Class INCREASED

42 42 M Mi

AB Classes INCREASED

11 11 M Mi

% Evolution of ABC Classes (Traditional and New Middle Classes)

% Classe ABC 1993 13.01 - 28.32 28.32 - 43.63 43.63 - 58.93 58.93 - 74.24 74.24 - 89.55

1993

% Classe ABC 2003 13.01 - 28.32 28.32 - 43.63 43.63 - 58.93 58.93 - 74.24 74.24 - 89.55

2003

% Classe ABC 2009 13.01 - 28.32 28.32 - 43.63 43.63 - 58.93 58.93 - 74.24 74.24 - 89.55

2009

% Classe ABC 1995 13.01 - 28.32 28.32 - 43.63 43.63 - 58.93 58.93 - 74.24 74.24 - 89.55

1995

% Classe ABC 2014 13.01 - 28.32 28.32 - 43.63 43.63 - 58.93 58.93 - 74.24 74.24 - 89.55

2014 (projection)

Source: Ipea from PNAD/IBGE microdata

1st Acquisition of Goods and Services

*only takes into account the ones who adquired the good or service in the last 3 years 28.5% 33.61% 35.29% 37.21% 38.88% 46.19% 47.67% 49.49% 64.57% 65.48% 74.80%

0% 10% 20% 30% 40% 50% 60% 70% 80%

1st time acquiring goods or services: Among those who purchased it in the last 3 years

Source: SAE desihned questions in SECOM – Quarterly Public Perception Poll – July/2014

0.535

Inequality of Per Capita Income (Gini)

Source: CPS;FGV from PNAD, PME and Census / IBGE microdata and Langoni (1973)

0.581 0.589 0.607 0.594 0.552 0.539 0.526

1960 1970 1979 1990 2001 2007 2009 2012

Year Inequality (Gini)

0,5 0,48 0,52 0,54 0,56 0,58 6 62

Long Run Perspective

1 3 5 7 9 11 17 19 13 15 2 4 6 8 10 12 18 20 14 16

Vintiles of Household Income - per capita Cumulative Growth (%)

120 80 60 40 20 100 140

Cumulative Growth Rate of Per Capita Income by Vintiles 2001-2012(%)

Changes in Income Distribution 2001 -2012

richest poorest

Soucre: IPEA/SAE from PNAD/IBGE microdata

138% 114% 26% 28% 33% 41% 107% 99% 96% 89% 85% 84% 79% 76% 74% 67% 62% 57% 53% 47%

5% 5% Income of the 5% poorest has grown 550% faster than the 5% richest

Between 2011 and 2012

3 20 1 2 4 5 6 7 8 9 10 13 11 12 14 15 16 17 18 19

Source: SAE from PNAD/IBGE microdata

Income variation

Per Capita Household Income Variation by Vintiles (%)

20 15 10 5

20.1 12.0 11.0 10.0 9.6 9.1 9.0 8.9 9.0 8.4 8.4 7.8 7.0 6.7 7.5 7.2 6.9 6.1 5.7 9.4

Vintiles of per capita household income

Stability of the Gini in 2012: Has inequality stopped falling?

5%- 5%+

GINI

0.62 0.60 0.58 2003 2004 2014 (mar.) 2002 (Mar.) 0.64 0.54 2005 2006 2007 2008 2009 2010 2011 2012 0.56 2013

Source: IPEA/SAE from PME/IBGE (2002-2014) microdata *the table only covers SP, RJ, BH and Recife

Income Inequality

Inequality index, March 2002 to March 2014 – Per Capita Labor Earnings 6 Main Metrocities

*Per Capita Household Labor Income - 15 to 65 Years

Gini Moving Average 12 Months – Only 4 MRs* Jan./14

55.4

Feb./14

55.3

Mar./14

55.2

April/14

55.1

May/14

55.0

June/14

54.9

July/14

54.8

16

Theil-T

0,85 0,80 0,65 2004 2014 (Mar.) 2003 (Mar.) 0,90 0,55 2005 2006 2007 2008 2009 2010 2011 2012 0,60 2013 0,70 0,75

Theil-T Moving Average 12 Months – Only 4 RMs* Jan./14

60.7

Feb./14

60.5

Mar./14

60.2

April/14

59.9

May/14

59.7

June/14

59.4

July/14

59.3

Income Inequality

Source: IPEA/SAE from PME/IBGE (2002-2014) microdata *the table only covers SP, RJ, BH and Recife *Per Capita Household Labor Income - 15 to 65 Years

Inequality index, March 2002 to March 2014 – Per Capita Labor Earnings 6 Main Metrocities

18.84%

Source: microdata from PME/IBGE. * between May 2002 and April 2003. ** between May 2013 and April 2014

12.94% 12.88% 12.00% 7.49% 3.51%

11 or + completed years of schooling Professional Course Contributes to Social Security Formal Employees Firm with 11 or + Employees 2 Years or + in the Job

Why Did It Fall?

Increase in Productive Attributes between 2003* e 2014** (in percentage points) 2003 - 2014 Growth of Productive Attributes

Real Growth between 2003 and 2014 (%)

0.914% 1.220% 0.505% 1.914% 1.014% 1.474%

Real Income Growth by Productive Attributes between 2003* e 2014** (Growth rate annual)

2003 - 2014

Total Mean 3.06% Real Growth between 2003 and 2014 (%)

Income Growth by Productive Attributes Why Did It Fall?

11 or + completed years of schooling Professional Course Contributes to Social Security Formal Employees Firm with 11 or + Employees 2 Years or + in the Job

Source: microdata from PME/IBGE. * between May 2002 and April 2003. ** between May 2013 and April 2014

4.2% 4.7% 4.1% 3.8% 3.8%

Women Blacks Periphery Youth >5 people in the HH

Increase in Income (%) by Personal Attributes between 2003* and 2014** (Growth rate annual)

Real Growth between 2003 and 2014 (%)

2003 - 2014

Total Mean 3.06%

Why Did It Fall?

Source: microdata from PME/IBGE. * between May 2002 and April 2003. ** between May 2013 and April 2014

Income Growth by Personal Attributes

Risk of Falling & Opportunity to Rise Across the Median in 12 months – Panel Data

2004/ 2005 2012/ 2013 2002/ 2003 2003/ 2004 2005/ 2006 2006/ 2007 2007/ 2008 2008/ 2009 2009/ 2010 2010/ 2011 2011/ 2012

Source: IPEA/SAE from PME/IBGE longitudinal microdata

Idiossincratic Risk of Per Capita Labor Income

The risk of crossing the median in an upward direction has never been so high: 27% of the people who were below the median crossed it in 2012/2013 – inversion of the risks of falling/rising 10 years later

30 25 15 10 5 20

16.01 26.24 18.81 17.03 16.42 16.80 17.79 14.41 17.58 12.73 13.69 20.12 19.45 13.71 13.31 13.19 13.79 13.57 23.10 24.86 26.34 27.13

Despite having lower chances of rising, the less educated, since 2002/2003, increased the controled chances (Dif in Dif) compared to the more educated. The same happens in favour of the black people and in favor of the residents in the periphery.

Equality

Looking at the distribution among individuals and social groups of income flows, stocks of assets and rights.

Sustainability (Assets)

Ability to maintain the standards of living

• achieved. Stocks of human,

environmental, physical , cultural and social assets.

Prosperity (Growth)

Growth in mean income and consumption (not only GDP/National Accounts but also look to Household Surveys data and PIT).

Sensibility (Perceptions)

The last dimension is subjective, based on people’s percepction about the country, the public services and life quality.

Inclusive Development?: Interactions

GDP X Mean Income PNAD

190 170 150 130 110 2004 2005 2007 2012 2003 210 90 2006 2008 2009 2010 2011

Real Per Capita 2003 = 100

127.70 140.69 165.88 180.78

127.8 151.7 178.4 206.17

How much did it grow?

Source: IPEA/SAE from PNAD/IBGE microdata and National Accounting/IBGE

Prosperity Equality

Real differences are explained by the use of different deflators, in nominal terms mean growth rates are similar

X Median Income PNAD X 10% Poorest

Contribution of Income Sources to Growth by Different Income Groups

Which source of income (program) contributed the most to growth?

2001 – 2012 in annual percentage points.

Mean 40% Poorest 5% Richest 10% Poorest

Labor 2.75 4.27 1.99 2.97 Bolsa Família 0.10 0.83 0.00 3.29 BPC (Social Assistance) 0.06 0.28

• 0.06

0.16 Social Security 0.74 0.89 0.32 0.23 Other 0.00 0.11

• 0.02

0.14 Total 3.64 6.38 2.23 6.80

Source: SAE from PNAD/IBGE microdata

Determinants of the Gains in Real Per Capita Prosperity from 2001 and 2012 in annual percentage points

Shared Prosperity

(Mean and Shared Bottom 40%)

Wages and Profits

Quantity = Participation Rate

+ Unemployment + Hours

Other

Educational Bonus 0.1 and 0.83 0.79 and 1.17 0.37 and -0.23 1.85 and 2.96 0.55 and 1.00 3.64 and 6.39 Value of Education 2.75 and 4.27

Labor Total Effect Bolsa Família

Social Security & BPC

MEAN AND GINI OF YEARS OF SCHOOLING

Source: Ipea / SAE, from Pnads 1992, 2002, 2011 e 2012 microdata

Education

Average Gini Index 0.250 0.300 0.350 0.400 0.450 0.500 5 6 7 8 9

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Average Years of Schooling Gini Index of Years of Schooling

Average and Gini Index of Years of Schooling in the Occupied and Paid Population

Still Bad Photo but Good Movie

Sustainability

Grade in Maths in PISA/OECD (2003)

Mathematics Profficiency

356

100 200 300 400 500 600

Hong Kong Finlândia Coréia Holanda Liechtenstein Japão Canadá Bélgica Suíça Macao Austrália Nova Zelândia República Tcheca Islândia Dinamarca França Suécia Áustria Irlanda Alemanha República Eslovaca Noruega Luxemburgo Hungria Polônia Espanha Estados Unidos Látvia Rússia Itália Portugal Grécia Sérvia Turquia Uruguai Tailândia México Indonésia Tunísia BRASIL

Source: Pisa/OECD (countries that are in both 2003 and 2012 samples.

Points Improvement in Maths in PISA/OECD (2003-2012)

Mathematics Profficiency

35

• 40
• 30
• 20
• 10

10 20 30 40

BRASIL Tunísia México Polônia Turquia Portugal Itália Indonésia Rússia Sérvia Coréia Hong Kong Macao Alemanha Tailândia Grécia Látvia Suíça Japão Austrália Espanha Liechtenstein Irlanda Estados Unidos Luxemburgo Noruega Uruguai Hungria Canadá Dinamarca Bélgica Holanda França República Eslovaca República Tcheca Austrália Islândia Nova Zelândia Finlândia Suécia

Source: Pisa/OECD.

Human Development Index by Municipality 2000 - IPEA/FJP/PNUD

Source: Ipea/PNUD/FJP from Demographic Census/IBGE 2010 microdata.

HDI 2000

0,800 a 1 0,700 a 0,799 0,600 a 0,699 0,500 a 0,599 0,000 a 0,499

In 2000, 41%

• f the

municipalities presented very low HDI

Human Development Index by Municipality 2010 - IPEA/FJP/PNUD

Source: Ipea/PNUD/FJP from Demographic Census/IBGE 2010 microdata.

HDI 2010

0,800 a 1 0,700 a 0,799 0,600 a 0,699 0,500 a 0,599 0,000 a 0,499

In 2010, 0.6%

• f the

municipalities presented very low HDI

Household & Individual Characteristics

Own House Effect - 2003 to 2012

Rural Northeast Time to Work >2 hours Room Wall made of Straw No indoor plumbing No bathroom

• r toilet

Source: IPEA from PNAD/IBGE microdata. Obs: The Own House Effect refers to the increase in imputed rent

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 80.7% 54.34% 81.7% 77.10% 92.70% 75.66% 74.71% 37.41% Total Brazil

PARTICIPATION OF RESIDENTIAL CAPITAL IN FAMILIES’ PHYSICAL ASSETS IS AROUND 50% IN BRAZIL AND ELSEWHERE

77.981% 51.718% 61.610% 57.160% 70.194% 90.079% 37.41%

Household & Individual Characteristics

Own House Effect - 2003 to 2012

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 5% Poorest (PCHI) 7 to 14 Years

• f Age

Black Informal Employee No instruction Individual Income up to ¼ Minimum Wage Total Brazil

Source: IPEA from PNAD/IBGE microdata. Obs: The Own House Effect refers to the increase in imputed rent

Also conditions within homes (durables) improved + than twice coverage of public services outside homes

Source: microdata from PNAD/IBGE

Inequality Fall in Residential Capital

• 0,02
• 0,01

0,01 0,02 0,03 0,04 0,05 0,06

10 20 30 40 50 60 70 80 90 100

Differences between concentration curves in time: 2003 to 2012 and 2009 to 2012

Property Income 2003/12 Household Income 2003/12 Property Income 2009/12 Household Income 2009/12

Values for July/2014

RENT YIELD versus PROPERTY VALUE

Rent Value/Property Value Ratio: PNAD/2003, SIPS/2013

0% 1% 2% 3% 4% 5% 6% 7% 8% 10 20 30 40 50 60 70 80 90 100

Ratio

Property Value (in R$ million)

Residential Capital

Besides equality and sustainability aspects, Popular Housing is also more Efficient

39

Personal Income Tax (PIT) Records and PNAD

2007 and 2012

Number Reporters Gross Income* Net Income* Tax Due

• A. Total

Population PNAD B. Household Per Capita Income PNAD

• C. Social

Security / Occupied

2012 25,617,525 2,106.72 1,990.86 115.86 195,376,249 943.61 60.39% 2007 25,224,768 1,406.65 1,326.26 80.39 185,502,098 766.55 50.96% Var 2012/2007 1.56% 49.77% 50.11% 44.12% 5.32% 23.10% 18.5%

Total Income PNAD A*B Var 2012/2007 29.65%

*In R$ billions of 31/12/2013 Source: RFB - IRPF

Proxy PNAD A*B*C Var 2012/2007 53.63%

In Atkinson chartbook: mean correlation between Gini and the Top 1% share = 0.9

But how high income growth in PIT will impact top incomes shares wrt National Accounts?

40

Functional Income Distribution and Income Tax Records Using Main Declared Occupation – 2007 and 2012

Source: SRF - IRPF

2012 Gross Total Income Net Total Income Number Forms Filled Income Tax Taxable Income Exclusive Taxable Income Exempt Income Capitalists 33.80% 34.96% 32.56% 14.65% 20.53% 39.22% 59.51% Rentiers 14.49% 14.57% 13.94% 13.21% 12.74% 17.78% 17.06% Workers 51.70% 50.47% 53.50% 72.14% 66.73% 43.01% 23.44% 2007 Capitalists 32.86% 33.90% 39.22% 15.75% 22.94% 43.81% 61.65% Rentiers 17.37% 17.23% 16.09% 19.65% 17.22% 19.11% 17.24% Workers 49.77% 48.86% 44.69% 64.60% 59.84% 37.08% 21.11%

National accounts report an increase in labor share from 54% to 56% from 2007 to 2011

0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 2012* 2007*

Gini

41

Income Tax – Inequality Explained by Differences in Declared Occupations - Total Net Income - 2007 and 2012

Source: SRF - IRPF

0.287 0,287701 0,372186

Gini

Var 2012/2007 -22.70%

0.37

42

Atk_2 Atk_1 Atk_05

GE_2

GE_1 GE_0

Gini

2012* 0.024592 0.012185 0.006057 0.011925 0.012035 0.012259 0.086052 2007* 0.032563 0.016713 0.008449 0.017475 0.017063 0.016854 0.101324 Dif. 2012/2007 -0.00797

• 0.00453
• 0.00239
• 0.00555
• 0.00503
• 0.0046 -0.01527

Var 2012/2007

• 24.48%
• 27.09%
• 28.31%
• 31.76%
• 29.47%
• 27.26% -15.07%

Income Tax – Inequality explained by Differences between States – 2007 and 2012 - Total Net Income by Declared Population PIT

Source: SRF - IRPF

Atk_ = Atkinson Inequality Index (respective coefficient of inequality aversion) GE_ = Generalized Entropy Index (respective parameter: 1= Theil L; 0 = Theil T)

Felicidade Futura ( 2015) 2.8 - 4 4 - 5.19 5.19 - 6.39 6.39 - 7.58 7.58 - 8.78 No Data

Source: Gallup World Poll microdata

Future Happiness

Life Satisfaction in 5 years

Brazil has the highest expected future life satisfaction: 8.8 on a 0 to 10 scale

2014 2013 2012 2011 2010 2009 2008 2007 2006 Total Mean Brazil

8.8 1 8.8 1 8.72 1 8.81 1 8.64 1 8.66 1 8.68 1 8.44 1 8.78 1 8.69

Brazil was for nine consecutive times the first in the World ranking of Future Happiness 5 years forward: The Country of the Future?

Sensibility

Source: Gallup World Poll 2006 microdata

Inequality of Future Happiness

Gini of Expected Life Satisfaction in 5 years

In spite of its high income inequality, Brazil has the second lowest inequality

• f expected future life satisfaction (just after Belgium).

Nation 6.8

Source : IPEA 2013

Geography of Life Satisfaction in 5 Years

2018 as seen from 2013

0 – 4 4 – 5.19 5.19 – 6.39 6.39 – 7.58 7.58 or more 0 – 4 4 – 5.19 5.19 – 6.39 6.39 – 7.58 7.58 or more

Individual 8.46

Source: SIPS/IPEA 2013 microdata

Demonstrations

Profile of Protesters

Variables / Participation Participated Didn’t participate but wanted to Dind’t participate, didn’t want to, but approves Disapproves Average Age 31 37 46 50 Men 49% 37% 34% 32% Until 4th grade completed 4% 18% 31% 45% Incomplete or Complete Tertiary Education 26% 16% 8% 5% Receives Bolsa Família 19% 19% 24% 27% Household Head Income R$ R$ 1,464 R$ 1,382 R$ 1,104 R$ 871 Total Household Income R$ R$ 2,836 R$ 2,544 R$ 1,802 R$ 1,722

Participation on 2013 Demonstrations – Order of Importance of Explanatory Variables: Stepwise Multinomial Ordered Logit Model

Variables Coefficient p-value Odds Ratio 1 Internet as Main Source Information 0.9893 <.0001 2.69 2 Northeast

• 0.736

<.0001 0.48 3 Head or Spouse

• 0.4172

0.0015 0.66 4 Work 0.2441 0.009 1.28 5 Incomes of the poorest improved + 0.3431 0.0001 1.41 6 Delay in Public Services Bill 0.2371 0.009 1.27 7 15-29 years 0.7224 <.0001 2.06 8 30-59 years 0.3755 0.0019 1.46 9 Is against Bolsa Familia 0.2638 0.0124 1.30 10 Has Private Health Insurance 0.192 0.0404 1.21 11 Confederations Cup City Host 0.443 0.0027 1.56 12 Central-West

• 0.4422

0.0555 0.64 13 Uses bus + than 3 times a week 0.2249 0.0464 1.25

Impacts of Bolsa Família on Final Goals: Changes in Life Satisfaction

Past X Present Happiness

Total Social Security Unemployment Insurance Bolsa Família 1 2 3 6 10 4 5 9 8 7

5.96 6.25 5.41 5.28 7.04 6.99 6.19 6.86 “Bolsa Família beneficiaries had initially the lowest past happiness ” “Present happiness is closer between beneficiaries and non-beneficiaries” In the world ranking, Bolsa Família beneficiaries were before the program between Pakistan and Paraguay.

Source: PPPP/IPEA October 2012

Sensibility

Increase in Present Happiness compared to Past Happiness

14.42%

Total Social Security Unemployment Insurance Bolsa Família 10% 0% 20% 30% 60% 40% 50%

“Bolsa Família beneficiaries showed the biggest jump of happiness compared with five years before leading to more equality in present life satisfaction” 29.92% 11.84% 18.12% “Comparing similar individuals with the same income today (in adittion to gender, age, marital status), receiving the Bolsa Família is associated with gains in present life satisfaction of 0.41 points compared to past life satisfaction*.”

Source: PPPP/IPEA October 2012 *Vis a vis non-beneficiaries, does not imply causality

Cash Transfers and Change in Life Satisfaction

0.00 0.20 0.40 0.60 0.80 1.00 0.00 1.00

Cumulative Income Cumulative Population

Labor Social Security Other Incomes BPC Bolsa Família Total per capita Income Source: SAE from microdata of PNAD/IBGE

BPC Poverty Other incomes Bolsa Família Labor Social Security Total per capita Income

Equality

Bolsa Família Impact on Inequality

The concentration curve of the Bolsa Família differs from other sources of income = Each R$ generates more Equality

Bolsa Familia covers 25% of Brazilian Population at a cost of 0,5% of GDP

Leaks

Government Income from Factors

Indirect Effects

Imports of goods and services Indirect Taxes Direct Effect Direct Taxes

Social Accounting Matrix and (MCS) the Circular Flow of Income obtained with the expansion of a cash transfer

Production Family income Transfer Capital Account Rest of the World

Prosperity

Source: Neri, Vaz e Ferreira (2013) from the Social Account Matrix of 2009 (construcyed from POF and National Accounts)

Bolsa Família Program (BFP) Continuous Cash Benefit (BPC) Unemployment Insurance (SegDesem) Wage Subsidy for Low Income Formal Employees Private sector pensions (RGPS) Public servants’ pensions (RPPS) Severance Fund Formal Employment (FGTS)

Prosperity

GROSS DOMESTIC PRODUCT

Multipliers

1.78 1.19 1.06 1.06 0.53 0.52 0.39 Bolsa Família BPC (Social Assistance) Unemployment Insurance Wage Subsidy Public Servants Pensions Private Employees Public Pension Severance Fund FGTS 2.70

Multiplier Effects of social transfers on:

Bolsa Familia & Social Federalism 3.0

10

Per capita family Income (U$)

15 5

Population

Benefits variable across families: Poorer get higher benefits

Poverty Gap Local Poverty Line Extreme Poverty Line BF US$ 1,25 PPP day US$ 2 PPP day

Permanent Income Estimate: using Administrative Records (CadÚnico) info:

Education all HH members, Housing & Public Services coverage, other benefits etc...

Identifies who is chronically poor, and not who says is poor

Life Cycle of Poverty - Simulation of the potential impact on extreme poverty rate by age of the new design benefits from Bolsa Família Program (%)

2 4 6 8 10 12 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80

Without Bolsa Família With Bolsa Família from 2011 With Bolsa Família from 2013 Source: V National Report on the Millennium Development Goals.

Without Bolsa Familia Extreme Poverty in 2012 would rise 36%

Bolsa Família Innovations

Payment Systems

• Completes Income towards the Poverty Line
• Use of International References (MDGs)
• Local Complements to Bolsa Família (Use of Permanent Income)
• Mothers Key Role (Search of Students Without Mother )

Conditionalities & Supply Services

• Parents Engagement (School Meetings on Saturdays)
• Early Childhood Education (Poor Kids are first in line; Cognitive & Non

Cognitive skills)

• Incentives to Perform (Alignment Teachers, Parents & Students + Youth Savings)

Bolsa Família Channels to Overcome Poverty (Means Approach)

OVERCOMING POVERTY

PRODUCTIVE INCLUSION INTERNAL INFRASTRUCTURE (HOUSEHOLD) CONDITIONALITIES DEMAND FOR EDUCATION AND HEALTH (EARLY CHILDHOOD) MONETARY TRANSFERS CASH IN THE HAND OF MOTHERS CONSUMER PROTECTION, FINANCIAL EDUCATION CREDIT, INSURANCE AND SAVINGS INCOME GENERATION Productivity EXTERNAL INFRASTRUCTURE CISTERNS TRANSPORTATION HEALTH SCHOOLS LEVERAGE OPPORTUNITIES AND SMOOTH SHOCKS Decent Markets DIRECT EFFECT WELL-BEING DIRECT EFFECT FAMILY BUDGET Microcredit & Vocational Education SUPPLY OF PUBLIC SERVICES HOUSING SEWAGE

Returning to Questions about the Quality of Development (Ends Approach)

• Inclusive? Falling Inequality;
• How much has grown? household perspective better than GDP;
• Perceived by the people? Subjective Measures of Well-Being rising;
• Sustainable? Rising Stocks of Education, Labor, HDI, Housing;

Poor Brazilians in household surveys have been improving more than the mean Brazil of National Accounts Brazil has been since the dawn of the new millenium the Country of the Past (not the contry of the future) Structural Change in the Basis of Assets Distribution = Deep Transformation

Map of Public Use Databases

Household Surveys Microdata Administrative Records PNAD (100,000 housedholds per year)

National Accounts IBGE (Hybrid)

Annual Cross-section (1976 -2012); IBGE Incomes, Residential Capital

PIT Personal Income Tax

POF (48,000 families per year) 1974; 2002; 2008

25 million individuals; 2007 -2012 Details: Incomes, Spending and Taxes Unified Register for Social

Programs – CadÚnico (60 million individuals) MDS

Mapping Subjective Surveys National

CENSUS (18 million individuals) 1960 - 2010 PPPP (3800 Interviews. 215 cities), Ipea

Population Perceptions on Public Policies, Individuals 15 years or older IBGE, Long Run Income and Special Detailed Maps Monitoring Subjective Surveys International

PME (36 mil dwellings month) 1980-2014, IBGE

Monthly Labor with a two month lag, 6 Metrocities,

Gallup World Poll (more than 150 countries &

200.000 Interviews) 2006 to 2014 Subjective and Objective Data, Individuals 15 years or older

Brazil Social: References & Links (Marcelo Neri)

Shared Prosperity:

http://www.compaso.com.br/docs/PP_Shared_Prosperity_Final.pdf

Middle Class:

http://www.compaso.com.br/docs/NCM_Neri_Sae_ClasseMedia_Ingl esFinal.pdf; http://www.cps.fgv.br/cps/livroncm/ & http://www.sae.gov.br/site/?p=22297

Social Tensions:

http://www.compaso.com.br/docs/Social_tension_final.pdf

Pro Poor Growth:

http://www.cps.fgv.br/cps/pesquisas/Politicas_sociais_alunos/2011/p df/5PP_KakwaniNeriSonsdarticle.pdf

Income Policies:

http://www.fgv.br/cps/docs/acad/BF_Livro_Scanner.pdf

Deprivation:

http://www.compaso.com.br/docs/PP_inequality_relative_deprivatio n_and_social_class_Final.pdf

Social Transformations (portuguese – recent study)

www.compaso.com.br/docs/Neri_TransformacoesSociaisAteJulho201 4.pdf

Bolsa Família Book Summary

http://www.ipea.gov.br/portal/images/stories/PDFs/140321_pbf_sum ex_ingles.pdf http://www.sae.gov.br/site/?p=22181

World Without Poverty

https://www.wwp.org.br/en

Human Development Map = Data Brazilian Cities

http://atlasbrasil.ipea.gov.br/2013/en/

Report on MDGs

http://www.sae.gov.br/site/?p=23274

Social Targets:

http://www.cps.fgv.br/cps/pesquisas/Politicas_sociais_alunos/2010/2 0100512/PDF/BES_MetasSociais_NeriXerez_Teoria.pdf

BRICS:

http://www.ipea.gov.br/forumbrics/en/

Brazilian Microdata & Data

http://www.econ.puc-rio.br/datazoom/ www.ibge.gov.br http://www.ipeadata.gov.br/

Thanks!