Assessing the efficiency of inequality changes in terms of poverty alleviation

This paper introduces a novel analytical approach to assess the efficiency of inequality reduction in poverty alleviation. I develop a general transform of the Lorenz curve that enables the computation of point elasticities of poverty with respect to inequality while perfectly controlling for changes in inequality levels. Unlike previous methods, the suggested approach makes it possible to measure elasticities corresponding to observed inequality changes. It also provides a framework for benchmarking these elasticities. These elasticities are estimated for different subperiods using Brazilian income distribution data from 1981-2022. Results show the increasing powerfulness of inequality reduction as a lever for poverty alleviation. Moreover, while decreased inequality significantly contributed to poverty reduction during Brazil's celebrated poverty reduction period between 2003 and 2014, I observe that the distributional changes were not more pro-poor, compared with later subperiods, yet more efficient than in earlier subperiods in terms of poverty reduction.