Inequality in Brazil: measurement, trends, impacts and policies Marcelo Neri Strategic Affairs (SAE/PR) and EPGE/FGV Wider, Helsinki, September 2014
Script • Overview: The Middle Path • Inequality: Trends, Causes and Impacts – Per Capita Household Income - Various Surveys – Interactions with Growth, Perceptions & Assets – Residential Capital & Personal Income Tax (PIT) • Public Policies Agenda: Bolsa Família (CCT)
Income Distribution Brazilian Per Capita GDP (PPP) is 93.7% of the World GDP in 2012 Relative to the World 100 Percentile of the World Income Distribution US 90 80 70 Russia 60 Brazil China 50 India 40 30 20 10 1 1 25 50 75 100 Each Country Source: Milanovic (2011)
Brazilian Per capita GDP PPP has grown 3.5% agains 3.6% of the Brazil is a small World world between 2002 e 2012 China Effect Chindia Effect .75 Inequality Across Nations .65 Gini Coefficient 0.607 0.589 0.594 0.581 .55 0.539 0.535 0.527 Falling in Brazil but still the 18th highest in 155 countries. .45 1950 1960 1970 1980 1990 2000 2009 2001 2011 Year Source: Milanovic (2011) and Neri (2011)
Gini Index of Per Capita Income Inequality Within Municipalities by Municipality - 2000 2000 Source: Demographic Census/IBGE microdata
Gini Index of Per Capita Income Inequality within Municipalities by Municipalities - 2010 Inequality fell in 80% of the 5500 Brazilian Municipalities 2010 Source: Demographic Census/IBGE microdata
% Population with Income Below U$ 1.25 per day PPP Brazil: Middle of the World Source: IPEA / SAE from PNUD
% Population with Income Below U$ 1.25 per day PPP A World within Brazil Source: IPEA / SAE from the Demographic Census/IBGE
What explains + Social Inclusion? Dynamic Decomposition of Extreme Poverty Fall of 69.3% in Brazil Growth or + Equity? Between 2002-2012 Brazil 1 st MDG: Extreme Poverty Line (U$S Main 1,25 a day PPP) fell 69% in 10 years Target Proportion of Extremelly Poor Component that Explains % of Total Fall ( 69.3%) 50.5% Income growth The Middle Path 49.5% Inequality Fall 100 Total Source: IPEA/SAE from PNAD/IBGE microdata
New Middle Class: Evolution of 2003 - 2014 Economic Classes Pyramid A to E Classes AB Classes INCREASED 11 M 11 Mi 29.5 Million 25.1 Million 14.1 Million Classes AB 68.5 Million C Class Classe C INCREASED 42 42 M Mi 118.9 Million 110.5 Million 97.8 Million 54.2 Million 63.5 Million Classes DE 2003 2012 2014* Source: CPS/FGV from PNAD/IBGE microdata * Forecast
% Evolution of ABC Classes (Traditional and New Middle Classes) 1993 1995 2014 (projection) % Classe ABC 1993 % Classe ABC 1995 13.01 - 28.32 13.01 - 28.32 28.32 - 43.63 28.32 - 43.63 43.63 - 58.93 43.63 - 58.93 58.93 - 74.24 58.93 - 74.24 74.24 - 89.55 74.24 - 89.55 2003 2009 % Classe ABC 2014 13.01 - 28.32 28.32 - 43.63 43.63 - 58.93 58.93 - 74.24 74.24 - 89.55 % Classe ABC 2003 % Classe ABC 2009 13.01 - 28.32 13.01 - 28.32 28.32 - 43.63 28.32 - 43.63 43.63 - 58.93 43.63 - 58.93 58.93 - 74.24 58.93 - 74.24 74.24 - 89.55 74.24 - 89.55 Source : Ipea from PNAD/IBGE microdata
1st Acquisition of Goods and Services 1st time acquiring goods or services: Among those who purchased it in the last 3 years 74.80% 80% 70% 65.48% 64.57% 60% 49.49% 47.67% 50% 46.19% 38.88% 37.21% 40% 35.29% 33.61% 28.5% 30% 20% 10% 0% *only takes into account the ones who adquired the good or service in the last 3 years Source: SAE desihned questions in SECOM – Quarterly Public Perception Poll – July/2014
Long Run Perspective Inequality of Per Capita Income (Gini) 62 0.607 0.594 6 0.589 0.581 0,58 Inequality (Gini) 0,56 0.552 0.539 0.535 0,54 0.526 0,52 0,5 0,48 1960 1970 1979 1990 2001 2007 2009 2012 Year Source: CPS;FGV from PNAD, PME and Census / IBGE microdata and Langoni (1973)
Changes in Income Distribution 2001 -2012 Cumulative Growth Rate of Per Capita Income by Vintiles 2001-2012(%) 138% 140 Income of the 5% poorest has 114% grown 550% faster than the 107% 120 5% richest 99% 96% Cumulative Growth (%) 89% 100 85% 84% 79% 76% 74% 80 67% 62% 57% 53% 60 47% 41% 33% 40 28% 26% 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 5% 5% Vintiles of Household Income - per capita poorest richest Soucre: IPEA/SAE from PNAD/IBGE microdata
Income variation Between 2011 and 2012 Per Capita Household Income Variation by Vintiles (%) 20.1 Stability of the Gini in 2012: 20 Has inequality stopped falling? 15 12.0 11.0 10.0 9.6 9.4 10 9.1 9.0 9.0 8.9 8.4 8.4 7.8 7.5 7.2 7.0 6.9 6.7 6.1 5.7 5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 5%- 5%+ Vintiles of per capita household income Source: SAE from PNAD/IBGE microdata
Income Inequality GINI Inequality index, March 2002 to March 2014 – Per Capita Labor Earnings 6 Main Metrocities 0.64 Gini Moving Average 12 Months – Only 4 0.62 MRs* 55.4 Jan./14 55.3 Feb./14 0.60 55.2 Mar./14 55.1 April/14 55.0 May/14 0.58 54.9 June/14 54.8 July/14 0.56 0.54 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Mar.) (mar.) Source: IPEA/SAE from PME/IBGE (2002-2014) microdata *the table only covers SP, RJ, BH and Recife 16 *Per Capita Household Labor Income - 15 to 65 Years
Income Inequality Theil-T Inequality index, March 2002 to March 2014 – Per Capita Labor Earnings 6 Main Metrocities Theil-T 0,90 Moving Average 12 Months – Only 4 0,85 RMs* 60.7 Jan./14 0,80 60.5 Feb./14 60.2 Mar./14 0,75 59.9 April/14 59.7 May/14 0,70 59.4 June/14 59.3 July/14 0,65 0,60 0,55 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Mar.) (Mar.) Source: IPEA/SAE from PME/IBGE (2002-2014) microdata *the table only covers SP, RJ, BH and Recife *Per Capita Household Labor Income - 15 to 65 Years
Why Did It Fall? 2003 - 2014 Growth of Productive Attributes Increase in Productive Attributes between 2003* e 2014** (in percentage points) 18.84% Real Growth between 2003 and 2014 12.94% 12.88% 12.00% (%) 7.49% 3.51% 11 or + completed Professional Contributes to Formal Firm with 2 Years or + years of schooling Course Social Security Employees 11 or + Employees in the Job Source: microdata from PME/IBGE. * between May 2002 and April 2003. ** between May 2013 and April 2014
Income Growth by Why Did It Fall? 2003 - 2014 Productive Attributes Real Income Growth by Productive Attributes between 2003* e 2014** (Growth rate annual) Total Mean 3.06% Real Growth between 2003 and 2014 1.914% 1.474% (%) 1.220% 1.014% 0.914% 0.505% 11 or + completed Professional Contributes to Formal Firm with 2 Years or + years of schooling Course Social Security Employees 11 or + Employees in the Job Source: microdata from PME/IBGE. * between May 2002 and April 2003. ** between May 2013 and April 2014
Income Growth by Why Did It Fall? 2003 - 2014 Personal Attributes Increase in Income (%) by Personal Attributes between 2003* and 2014** (Growth rate annual) Real Growth between 2003 and 2014 4.7% 4.2% 4.1% 3.8% 3.8% Total (%) Mean 3.06% Women Blacks Periphery Youth >5 people in the HH Source: microdata from PME/IBGE. * between May 2002 and April 2003. ** between May 2013 and April 2014
Idiossincratic Risk of Risk of Falling & Opportunity to Rise Across the Median in 12 months – Per Capita Labor Income Panel Data The risk of crossing the median in an upward direction has never been so high: 27% of the people who were below the median crossed it in 2012/2013 – inversion of the risks of falling/rising 10 years later 30 Source: IPEA/SAE from PME/IBGE longitudinal microdata 27.13 26.34 26.24 24.86 25 23.10 20.12 19.45 18.81 20 17.79 17.58 16.80 17.03 16.01 16.42 14.41 13.71 13.79 13.69 13.19 13.31 15 12.73 13.57 10 5 2002/ 2003/ 2004/ 2005/ 2006/ 2007/ 2008/ 2009/ 2010/ 2011/ 2012/ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Despite having lower chances of rising, the less educated , since 2002/2003, increased the controled chances (Dif in Dif) compared to the more educated . The same happens in favour of the black people and in favor of the residents in the periphery .
Inclusive Development?: Interactions Sustainability (Assets) Equality Looking at the distribution among Ability to maintain the standards of living individuals and social groups of achieved. Stocks of human, environmental, physical , cultural income flows, stocks of assets and and social assets. rights. Prosperity (Growth) Sensibility (Perceptions) Growth in mean income and The last dimension is subjective , based on consumption (not only GDP /National people’s percepction about the country , Accounts but also look to the public services and life quality . Household Surveys data and PIT ).
Prosperity Equality How much did it grow? GDP X Mean Income PNAD X Median Income PNAD X 10% Poorest Real Per Capita 2003 = 100 210 206.17 Real differences are explained by the use of different deflators, in nominal terms mean growth rates are similar 190 180.78 178.4 170 165.88 151.7 150 140.69 130 127.8 127.70 110 90 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: IPEA/SAE from PNAD/IBGE microdata and National Accounting/IBGE
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