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Sugar Prices, Labor Income, and Poverty in Brazil

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  • Ekaterina Krivonos

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  • Marcelo Olarreaga

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Abstract

This paper assesses the impact of a potential liberalization of sugar regimes in OECD countries on household labor income and poverty in Brazil. Our results suggest that the largest increases in wages are to be experienced among workers in sugar-growing and sugar-processing sectors. Workers in other sectors experience modest wage gains, except low- and medium-educated workers in the service sector who see their wages decline. More surprisingly, after an increase in the price of an unskilled-labor-intensive good (sugar), skilled workers get the largest wage increase. However, the largest labor income gains are experienced by unskilled workers, mainly though movements out of unemployment. Our estimates show that approximately 280,000 individuals would move out of poverty following a hypothetical 10 percent increase in sugar prices. This finding highlights the importance of considering the employment channel when studying the poverty impacts of trade reforms.

Suggested Citation

  • Ekaterina Krivonos & Marcelo Olarreaga, 2009. "Sugar Prices, Labor Income, and Poverty in Brazil," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Spring 20), pages 95-128, January.
  • Handle: RePEc:col:000425:008588
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    References listed on IDEAS

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    1. Porto, Guido G., 2006. "Using survey data to assess the distributional effects of trade policy," Journal of International Economics, Elsevier, vol. 70(1), pages 140-160, September.
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    4. Krivonos, Ekaterina, 2004. "The impact of coffee market reforms on producer prices and price transmission," Policy Research Working Paper Series 3358, The World Bank.
    5. Guilhoto, Joaquim José Martins & Barros, Alexandre L. Mendonça de & Marjotta-Maistro, Marta C. & Istake, Márcia, 2002. "Mechanization process of the sugar cane harvest and its direct and indirect impact over the employment in Brazil and in its 5 macro regions," MPRA Paper 38070, University Library of Munich, Germany.
    6. Porto, Guido G., 2005. "Informal export barriers and poverty," Journal of International Economics, Elsevier, vol. 66(2), pages 447-470, July.
    7. Nicita, Alessandro, 2004. "Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare," Policy Research Working Paper Series 3265, The World Bank.
    8. Nina Pavcnik & Andreas Blom & Pinelopi Goldberg & Norbert Schady, 2004. "Trade Liberalization and Industry Wage Structure: Evidence from Brazil," World Bank Economic Review, World Bank Group, vol. 18(3), pages 319-344.
    9. John Baffes & Bruce Gardner, 2003. "The transmission of world commodity prices to domestic markets under policy reforms in developing countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 159-180.
    10. Nicita, Alessandro, 2004. "Efficiency and equity of a marginal tax reform - income, quality, and price elasticities for Mexico," Policy Research Working Paper Series 3266, The World Bank.
    11. Mitchell, Donald, 2004. "Sugar policies opportunity for change," Policy Research Working Paper Series 3222, The World Bank.
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    Citations

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    Cited by:

    1. Marie-Gabrielle Piketty & Tatiane de Menezes & João Bernardo Neto Aurélio Duarte, 2008. "Sugar cane in Brazil, poverty and equity: evidences for the 1992-2006 period," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211634520, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Azadi, Hossein & de Jong, Sanne & Derudder, Ben & De Maeyer, Philippe & Witlox, Frank, 2012. "Bitter sweet: How sustainable is bio-ethanol production in Brazil?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(6), pages 3599-3603.
    3. Ole Boysen, 2009. "Border Price Shocks, Spatial Price Variation, and their Impacts on Poverty in Uganda," The Institute for International Integration Studies Discussion Paper Series iiisdp306, IIIS.
    4. Nicita, Alessandro & Olarreaga, Marcelo & Porto, Guido, 2014. "Pro-poor trade policy in Sub-Saharan Africa," Journal of International Economics, Elsevier, vol. 92(2), pages 252-265.
    5. Brambilla, Irene & Porto, Guido, 2016. "Trade, Poverty Eradication, and the Sustainable Development Goals," ADBI Working Papers 629, Asian Development Bank Institute.
    6. Oh, Saera & Lee, Sang Hyeon, 2017. "Does trade contribute to poverty reduction? If it does, where the benefit goes to?," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252849, Southern Agricultural Economics Association.
    7. Sylvain Chabe-Ferret & Julien Gourdon & Mohamed Ali Marouani & Tancrède Voituriez, 2007. "Trade-Induced Changes in Economic Inequality: Assessment Issues and Policy Implications for Developing Countries," Working Papers DT/2007/11, DIAL (Développement, Institutions et Mondialisation).
    8. repec:dau:papers:123456789/4331 is not listed on IDEAS
    9. Chisanga, Brian, 2012. "Efficiency and integration in the Zambian sugar market: analysing price transmission, price formation and policy," Research Theses 134483, Collaborative Masters Program in Agricultural and Applied Economics.
    10. Lucie Ménager & Christine Valente, 2011. "Market power and voluntary land redistribution," Working Papers hal-00867615, HAL.

    More about this item

    Keywords

    Trade; Sugar; Wages; Brazil;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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