antipoverty transfers and inclusive growth in brazil

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Antipoverty transfers and inclusive growth

Armando Barrientos, Dario Debowicz, and Ingrid Woolard

Inequality, inclusion and infrastructure in Brazil, LSE Workshop, September 2014

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Inclusive growth is the distinctive feature of Brazil’s recent performance.

What is the relative contribution of growth and redistribution?

Expansion of income transfers to low income households, especially Bolsa Família, leading to

poverty and inequality reduction

How and why antipoverty income transfers contribute to inclusive growth?

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Three main points

1. Considerable attention has been paid to Bolsa Família (BF) as the flagship social assistance

programme in Brazil, but it is important to consider all antipoverty transfers, especially the

two non-contributory pensions: Previdência Social Rural (PSR) and Beneficio de Prestação

Continuada (BPC); and it is important to pay attention to the conceptual and normative

frameworks underlying them

2. The contribution of social assistance to inclusive growth in Brazil is explained by its focus

on human capital and ‘productivism’

3. There is a large literature on the (mean) impact of these programmes, but less is known

about the distribution of their outcomes analysis of the distribution of Bolsa Família

outcomes across municipalities in Brazil

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Figure 1. Evolution of social assistance components and programmes in Brazil

Previdência Social Rural [A]

1988 Benefício de Prestação Continuada [B]

Constitution

Bolsa Escola [C]

Municipal Federal

Bolsa Família [C]

PETI (Child Labour) [C] BrasilCarinhoso

4 other ccts

1988 1991 1995 1996 2001 2003 2012

Three routes to inclusion in Brazil:

[A] Preferential inclusion of rural informal workers into the private sector social insurance fund (supported by government

subsidies and commonly described as semi-contributory).

[B] ‘Canonical’ social assistance for older and disabled people in households with per capita household income below 1/4 of

minimum wage. Additional components: BPC na Escola, BPC Trabalho

[C] Human development conditional income transfers: Bolsa Escola began in a few municipalities in 1995; then spread to

other municipalities with federal government counterpart funding in 1997; becoming a federal programme in 2001.

Together with other income transfer programmes from separate Ministries it was unified under Bolsa Familia in 2003. Brasil

Carinhoso provides a guaranteed minimum income floor at the extreme poverty line in 2012.

Number of Transfers/Public Subsidy in 2010: [A] 7.8m /1.4%GDP [B] 4.2 m/ 0.7%GDP [C] 14 m/ 0.6% GDP

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Expansion of antipoverty transfers

Note: PSR is Previdência Social Rural; RMV is Renda Mensal Vitalícia a non-contributory pension programme replaced by the Benefício de Prestação Continuada or

BPC in 1996. BF is Bolsa Família. The Figure shows the stock of transfers in December of each year, except for 2013 which reports the numbers in the last month

available. Data Source: IPEA and MDS data available online at http://www.ipeadata.gov.br/ and http://www.mds.gov.br/relcrys/bpc/indice.htm .

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mill

ion

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Number of social assistance transfers

PSR RMV BPC BF

http://www.ipeadata.gov.br/

http://www.mds.gov.br/relcrys/bpc/indice.htm

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Table 1. Social Assistance in Brazil: main programmes. Values are for July 2014 (US$ 2013 PPP 1= RS$1.61)

PSR BPC BF Eligibility Long-term rural

informal workers (>15

years)

Disabled/Aged ≥ 65 in

households with per

capita income ≤ ¼ MW

Households with per capita income ≤ R$77 (US$48) and

households with children with per capita income ≤ R$154

(US$96)

Monthly

benefits

Old age pension is

one minimum

wage R$724

(US$450)

One minimum wage

R$724 (US$450)

Basic transfers=R$77 (US$48).

Variable transfer=R$35 (US$22) per child (0-15) up to

five; R$ 42 (US$26) for each youth (16-17) up to two;

R$35 (US$22) if expectant mothers; R$35 (US$22) if

children 0-6 months.

Households with per capita income > R$77 and ≤

R$154 receive child transfers only

From 2012, the Beneficio de Superação da Extrema

Pobreza provides a ‘top up’ to households with

children 0-15 with per capita incomes below R$77

after transfers Reach 7.8 m. beneficiaries 4.2 m. beneficiaries 14 m. households

Budget%GDP 1.4 0.7 0.6

Agencies

responsible

Regime Geral de

Previdência Social

Ministério de

Previdência Social

Ministério de

Desenvolvimento Social

Ministério de

Previdência Social

Ministério de Desenvolvimento Social

Caixa Econômica Federal

Source: Barrientos (2013a), updated to July 2014.

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In sum:

Three parallel inclusion strategies in Brazil, but Bolsa Família becomes the flagship programme

Therefore focus on human capital and ‘productivist’ in the sense of complementing

productive employment

Planned consolidation of BF and BPC under the MDS (SNAS)

PSR expected to ‘wither’

Rapid expansion in coverage especially since 2003 – covering roughly 24 million households

Rise in the value of transfers:

PSR and BPC due to the rise in the real value of the minimum wage;

and discretionary adjustment in the value of the components of BPC, but also additional

transfers – ‘income guarantee’

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Outcomes

PSR

Early study by Delgado and Cardoso [2000] tracked impact on poverty and

livelihoods; while Barbosa [2010] reported large first order effects on poverty and

extreme poverty; but drop in labour force participation (-8%) an hours [Carvalho

2008]; effects extend to pensioner households, school enrolments in particular

BPC

First order effects on household poverty [Barrientos and Mase 2013]; and

reduction in child labour and labour force participation of pensioners 2-3%

[Kassouf et al 2011]

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BF

Impact evaluation data [de Brauw, Gilligan et al 2012] show impact along a range

of household variables: children’s nutrition; school attendance [4pps] larger for

girls and in the Northeast; delayed entry into the labour market by 1 year

Impacts on poverty and inequality are based on PNAD data, again first order

effects poverty. BF accounts for 2pp of 1999-2009 reduction in headcount poverty

from 26% to 14%; and 1.6pp of a reduction in extreme poverty from 9.9% to 4.8%)

[Soares et al 2010]. BF accounts for 16% of a 10% decline in the Gini, and BPC for a

further 14%.

Labour supply: several studies but the broad conclusion is that effects on adult

labour force participation are marginal [Oliveira and Soares 2012]; reduction in

child labour

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In sum

Transfer programme outcomes show a transmission belt to inclusive growth:

Improvements in household income which reduce poverty while complementary

to employment

Improvements in household productive capacity, including investment in human

capital

Targeted on low income groups

Studies focused on mean outcomes, but what about the distribution of outcomes?

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What is the distribution of outcomes across municipalities?

Several studies on Brazil’s antipoverty programmes suggest underlying

heterogeneity in outcomes

Quantile regression approach applied to a panel of municipalities with the aim of

estimating the distribution of Bolsa Família outcomes:

Estimate conditional quantile regressions as:

( | ) ∑

(1’)

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Data:

Use survey data from PNAD 2003-9; aggregate variables at the municipality level,

e.g. outcome variables such as labour force participation and school attendance;

and covariates capturing individual and household characteristics including BF

participation panel with 1911 observations (possible bias towards larger

metropolitan municipalities).

Table 2. Summary statistics on labour supply, school attendance and Bolsa Família incidence

Labour supply (%) Female school attendance (%) Male school attendance (%) Bolsa Família incidence (%)

Un-weighted mean 2003-2005 76.7 95.8 95.1 14.0

Un-weighted mean 2006-2009 76.8 97.0 96.4 17.3

Un-weighted mean 2003-2009 76.8 96.5 95.9 15.9

Quantile

.1 68.3 90.1 90.0 1.9

.25 72.7 94.4 93.7 5.2

.5 77.0 97.4 96.7 12.0

.75 81.0 100.0 100.0 23.8

.9 85.0 100.0 100.0 36.9

Source: Author’s elaboration based on PNAD 2003-2009 aggregated at municipal level.

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Labour supply outcomes

associated with BF not

significant

Figure 3. The distribution of Bolsa Família effects on adult labour force participation rate

across quantiles of a panel of municipalities 2003-2009

Source: Authors’ quantile regression panel data and OLS regressions. For quantile regressions, point

estimates and bootstrapped confidence intervals at 90% and 95% are included. All specifications

include all regressors, including per capita income, adult school level, employment structure,

household head characteristics, other individual characteristics, dwelling characteristics,

geographical area, as well as unobservable accounting characteristics. The sample size is 1,911 self-

representative municipal observations given by 7 observations for each of 273 self-representative

municipalities.

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ase in p

rogra

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ence

0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1Quantiles

OLS

PD

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School attendance outcomes

associated with BF positive and

significant up to the 0.5 quantile;

effect is small for a municipality

at the global maximum 8pp

increase in BF incidence needed

for a 1pp increase in school

attendance rate

Figure 4. The distribution of Bolsa Familia effects on school attendance rates of girls 6-15

years old across quantiles of a panel of municipalities 2003-2009

Source: Authors’ quantile regression panel data and OLS regressions. For quantile regressions, point

estimates and bootstrapped confidence intervals at 90% and 95% are included. All specifications

include all regressors, including per capita income, adult school level, employment structure,

household head characteristics, other individual characteristics, dwelling characteristics,

geographical area, as well as unobservable accounting characteristics. The sample size is 1,911 self-

representative municipal observations given by 7 observations for each of 273 self-representative

municipalities.

0.1

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an

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(p

.p.)

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. in

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ase in p

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0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1Quantiles

PD

OLS

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The results suggest that there might be a second transmission belt from antipoverty

transfers, Bolsa Família, to inclusive growth:

Bolsa Família show stronger school attendance outcomes for girls for municipalities

with lower school attendance rates, therefore reducing differential outcomes across

municipalities

The distribution of Bolsa Familia outcomes for girls’ school attendance is skewed

towards municipalities with poorer rates.

Important to keep in mind that our conditional quantile regression model has not been

applied to estimate the effects of antipoverty transfer programmes before, and is

therefore untested

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Conclusions

The 1988 Constitution led to the emergence of social assistance in Brazil as a means to address

exclusion. Three strategies:

A. Preferential inclusion of informal workers into social insurance scheme (supported by

government subsidies/semi-contributory)

B. ‘Canonical’ social assistance for disabled and aged in households in extreme poverty

C. Human development conditional income guarantee

Over time, all three strategies developed an institutional basis and grew in coverage, but Bolsa

Família becomes the flagship programme

Why have antipoverty transfers in Brazil have contributed to inclusive growth?

…because of a strong focus on human capital and a productivist orientation

How?

by facilitating an improvement in (mean) outcomes of lower income groups

by improving the distribution of outcomes across municipalities (Bolsa Família)

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0.55

0.38

1.29

0.09

2.35

3.5

12.3

7.1

16.4

0.93

Beneficio de Prestaçao Continuada

Bolsa Familia

Private Sector Social Insurance Fund (RGPS) Rural

Private Sector Social Insurance Fund (RGPS) Urban

Public Sector Social Insurance Funds (RPPS)

Brazil's social protection: Financing requirement and transfers 2008/9

number of transfers (millions) 2009 Financing requirement (%GDP) 2008

Own calculations from data in Mesquita [2010]

antipoverty transfers and inclusive growth in brazil

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