Would Trade Liberalization Help the Poor of Brazil?

Abstract

This paper addresses the potential effects of world agricultural trade liberalization on poverty and regional income distribution in Brazil, using an inter-regional applied general equilibrium (AGE) and a micro-simulation model of Brazil tailored for income distribution and poverty analysis by using a detailed representation of households. The model distinguishes 10 different labor types and has 270 different household expenditure patterns. Income can originate from 41 different production activities located in 27 different regions in the country.The AGE model communicates to a micro-simulation model that has around 112,000Brazilian households and 264,000 adults. Poverty and income distribution indices are computed over the entire sample of households and persons, before and after the policy shocks. The simulated trade liberalization scenario causes agriculture to expand considerably and so, given the importance that agriculture still has for the poorest in Brazil, it has positive impacts on poverty in Brazil. The only states which show an increase in the number of poor households are Sao Paulo and Rio de Janeiro, where the bulk of the manufacturing activities in Brazil are concentrated. There is an even more positive impact on inequality. The higher fall in the poverty gap is shown to occur mainly on the poorest household groups, suggesting that the poorest among Brazil's poor would benefit more from global trade liberalization. JEL codes: D30, D58, D63, F13, O53, Q18 Although Brazil has many poor people, it is not (on average) a very poor country: as many as 77 percent of the world's people, and 64 percent of nations, have average incomes less than Brazil's. But, due to a particularly uneven income distribution, about 30 percent of Brazilians are poor, a figure which would be just 8 percent if incomes in Brazil were distributed as evenly as in other countries with similar per capita incomes (Barros, Henriques and Mendonça 2001). The same authors show that in 1999 one-third of the Brazilian population lived in households with income below the poverty line (about 53 million people, down from 40 percent in 1977), and 14 percent lived in extreme poverty. Whether measured as a percentage of the population or in terms of a poverty gap, Brazil's poverty stabilized betweenthe second half of the 1980s and 2001 at a lower level than previously, before the situation started to change again, as will be seen below. Barros and Mendonça (1997) analyze the impact on poverty of the relationship between economic growth and reductions in inequality in Brazil. They conclude that an improvement in the distribution of income would be more effective for poverty reduction than economic growth that maintained the current pattern of inequality. According to these authors, due to the very high level of income inequality in Brazil it is possible to dramatically reduce poverty in the country even without economic growth, if the level of inequality in Brazil became closer to what can be observed in a typical Latin American country.Brazilian...

Climate change, agriculture and economic effects on different regions of Brazil

“…The model used in our analysis is the TERM-BR model, a CGE model of the Brazilian economy whose theoretical structure is based on previous work by Horridge et al (2005), Ferreira Filho and Horridge (2006Horridge ( , 2008 and Ferreira Filho et al (2010) (IBGE, 2004).…”

“…The model used in our analysis is the TERM-BR model, a CGE model of the Brazilian economy whose theoretical structure is based on previous work by Horridge et al (2005), Ferreira Filho and Horridge (2006, 2008) and Ferreira Filho et al (2010). The model's core databases are the 2005 Brazilian Input-Output table (IBGE, 2004), as well as the Brazilian National Household Survey ( Pesquisa Nacional por Amostragens de Domicílios , or PNAD) for the year 2005 (IBGE, 2006a), and the Brazilian Expenditure Survey ( Pesquisa de Orçamentos Familiares , or POF) for the year 2004 (IBGE, 2004).…”