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Brazil’s Recent Experience with Poverty and Inequality Reduction Beijing, October 18 th, 2007 Francisco H. G. Ferreira The World Bank.

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Presentation on theme: "Brazil’s Recent Experience with Poverty and Inequality Reduction Beijing, October 18 th, 2007 Francisco H. G. Ferreira The World Bank."— Presentation transcript:

1 Brazil’s Recent Experience with Poverty and Inequality Reduction Beijing, October 18 th, 2007 Francisco H. G. Ferreira The World Bank

2 Poverty in Brazil over the last quarter century: Falls from 38% to 20% from the trough of the 1983 recession to Highly volatile in the 1980s. Persistent but slow decline in the 1990s and 2000s.

3 Resulting from a mediocre growth performance, and an inverted-U inequality trajectory:

4 Though mediocre by comparison with other emerging economies, Brazil’s growth was still the principal driver of poverty reduction. But the sustained reduction in inequality since 1994 has boosted that impact.

5 All of the poverty decline in the last quarter century took place since 1993: –FGT(0) fell from 33% to 22% (a 33% decline) –FGT(1) fell from 15% to 9% (a 40% decline) –FGT(2) fell from 9% to 5% (a 44% decline) The incidence of the growth process since 1993 has been qualitatively different:

6 Candidate Explanation (1): Macroeconomic Stability Source: Ferreira, Leite, Litchfield and Ulyssea (2006): Economica.

7 Candidate Explanation (2): Educational Expansion Brazil is “winning” the Tinbergen Race: the supply of skills is expanding faster than demand. Though this is good for inequality reduction, it also reflects growth weakness.

8 Candidate Explanation (3): Trade Liberalization increased demand for low-skilled workers… Source for last two slides: Ferreira, Leite & Wai-Poi (2007): World Bank PRWP #4108

9 Candidate Explanation (4): …thereby making growth in the tradable sectors more pro-poor. Source: Ferreira, Leite & Ravallion (2007): “Why has Brazil’s Economic Growth not had more impact on poverty?”

10 Candidate Explanation (5): Substantial increases in expenditure on social security and assistance. Source: Ferreira, Leite & Ravallion (2007): “Why has Brazil’s Economic Growth not had more impact on poverty?”

11 Conclusions / Take Home Points 1.Growth is the fundamental driver of poverty reduction – even in Latin America… 2.Growth with redistribution and falling inequality is both: Possible (and there is no convincing evidence of a trade-off) More effective in reducing poverty. 3.Efficiency-enhancing (“neoliberal”?) reforms can (under certain circumstances) help spur both faster growth and less inequality. Macroeconomic stability and freer trade were key in Brazil. 4.But a much larger and more progressive welfare role for the State is called for.


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