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The slippery slope : explaining the increase in extreme poverty in urban Brazil, 1976-96

Author

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  • Ferreira, Francisco H. G.
  • Paes de Barrios, Ricardo

Abstract

Despite tremendous macroeconomic instability in Brazil, the country's distributions of urban income in 1976 and 1996 appear, at first glance, deceptively similar. Mean household income per capita was stagnant, with minute accumulated growth (4.3 percent) over the two decades. The Gini coefficient hovered just above 0.59 in both years, and the incidence of poverty (relative to a poverty line of R$60 a month in 1996 prices) remained effectively unchanged over the period, at 22 percent. Behind this apparent stability, however, a powerful combination of labor market, demographic, and educational dynamics was at work, one effect of which was to generate a substantial increase in extreme urban poverty. Using a decomposition methodology based on micro-simulation, which endogenizes labor incomes, individual occupational choices, and decisions about education, the authors show that the distribution of income was being affected by: 1) Three factors that tended to increase poverty-a decline in average returns to education and experience, a negative"growth"effect, and unfortunate changes in the structure of occupations and participation in the labor force. 2) Two factors that tended to reduce poverty-improved educational endowments across the board, and a progressive reduction in dependency ratios. The net effect was small and negative for measured inequality overall, and negligible for the incidence of poverty (relative to"high"poverty lines). But the net effect was to substantially increase extreme poverty-suggesting the creation of a group of urban households excluded from any labor market and trapped in indigence. Above the 15th percentile, urban Brazilians have"stayed put"only by climbing hard up a slippery slope. Counteracting failing returns in both self-employment and the labor market required substantially reduced fertility rates and an average of two extra years of schooling (which still left them undereducated for that income level).

Suggested Citation

  • Ferreira, Francisco H. G. & Paes de Barrios, Ricardo, 1999. "The slippery slope : explaining the increase in extreme poverty in urban Brazil, 1976-96," Policy Research Working Paper Series 2210, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2210
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    Citations

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    Cited by:

    1. Andre Portela Souza, 2002. "Wage Inequality Changes in Brazil: Market Forces, Macroeconomic Instability and Labor Market Institutions (1981-1997)," Vanderbilt University Department of Economics Working Papers 0215, Vanderbilt University Department of Economics.
    2. David Bravo & Dante Contreras & Sergio Urzúa, 2002. "Poverty and Inequality in Chile 1990-1998: Learning from Microeconomic Simulations," Working Papers wp198, University of Chile, Department of Economics.
    3. Carlos Azzoni & Fernando G. Da Silveira & Alexandre Iwata & Carlos R. Azzoni & Antonio Ibarra, "undated". "Estimating Regional Poverty Lines With Scarce Data: An Application to Brazilian Regions," Regional and Urban Modeling 283600003, EcoMod.
    4. Claudia Gutierrez, 2008. "Analysis of Poverty and Inequality in Bolivia,1999-2005: A Microsimulation Approach," Development Research Working Paper Series 01/2008, Institute for Advanced Development Studies.
    5. Francisco Ferreira, 2010. "Distributions in motion: Economic growth, inequality, and poverty dynamics," Working Papers 183, ECINEQ, Society for the Study of Economic Inequality.
    6. Bourguignon, Francois, 2005. "The Effect of Economic Growth on Social Structures," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 27, pages 1701-1747 Elsevier.
    7. Barros, Ricardo Paes de & Ferreira, Francisco, 2000. "Education and income distribution in urban Brazil, 1976-1996," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    8. Menezes-Filho, Naercio Aquino & Fernandes, Reynaldo & Picchetti, Paulo, 2006. "Rising Human Capital but Constant Inequality: The Education Composition Effect in Brazil," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 60(4), February.
    9. François Bourguignon & Francisco H. G. Ferreira & Marta Menéndez, 2007. "Inequality Of Opportunity In Brazil," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(4), pages 585-618, December.
    10. Bigsten , Arne & Levin, Jörgen, 2000. "Growth, Income Distribution, and Poverty: A Review," Working Papers in Economics 32, University of Gothenburg, Department of Economics.
    11. François Bourguignon & Francisco de Hollanda Guimarães Ferreira, 2000. "Understanding inequality in Brazil: a conceptual overview," Textos para discussão 434, Department of Economics PUC-Rio (Brazil).
    12. Kanbur, Ravi & Squire, Lyn, 1999. "The Evolution of Thinking About Poverty: Exploring the Interactions," Working Papers 127697, Cornell University, Department of Applied Economics and Management.
    13. Gonzalez-Rozada, Martin & Menendez, Alicia, 2006. "Why Have Urban Poverty and Income Inequality Increased So Much? Argentina, 1991-2001," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 109-138, October.
    14. World Bank, 2010. "Ethiopia : Re-Igniting Poverty Reduction in Urban Ethiopia through Inclusive Growth," World Bank Other Operational Studies 2921, The World Bank.
    15. Rodrik, Dani, 2001. "Why is there so much economic insecurity in Latin America?," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    16. Hasan, Rana & Jandoc, Karl Robert L., 2009. "Quality of Jobs in the Philippines: Comparing Self-Employment with Wage Employment," ADB Economics Working Paper Series 148, Asian Development Bank.
    17. GRIES, Thomas & PALNAU, Irene, 2016. "Distress Beyond Poverty: Spatial Patterns And Geographic Aspects Of Vulnerability In Brazil," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 16(2), pages 53-70.
    18. Arbache, Jorge Saba, 2004. "Do Structural Reforms always Succeed? Lessons from Brazil," WIDER Working Paper Series 058, World Institute for Development Economic Research (UNU-WIDER).

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